While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends and subsequently result in precipitous share price declines.
TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.
These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.
The following pages contain our analysis of 5 stocks with substantial yields, that ultimately, we have rated "Hold." Annaly Capital Management (NYSE: NLY) shares currently have a dividend yield of 13.30%. Annaly Capital Management, Inc. owns, manages, and finances a portfolio of real estate related investments in United States. The company has a P/E ratio of 7.11. The average volume for Annaly Capital Management has been 13,776,000 shares per day over the past 30 days. Annaly Capital Management has a market cap of $11.4 billion and is part of the real estate industry. Shares are down 14.5% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Annaly Capital Management as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and unimpressive growth in net income. Highlights from the ratings report include:
- The gross profit margin for ANNALY CAPITAL MANAGEMENT is currently very high, coming in at 94.49%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 92.42% significantly outperformed against the industry average.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ANNALY CAPITAL MANAGEMENT has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- The change in net income from the same quarter one year ago has exceeded that of the Real Estate Investment Trusts (REITs) industry average, but is less than that of the S&P 500. The net income has decreased by 3.5% when compared to the same quarter one year ago, dropping from $901.81 million to $870.28 million.
- Net operating cash flow has significantly decreased to -$3,882.25 million or 177.73% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Annaly Capital Management Ratings Report.