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 3 stocks with substantial yields, that ultimately, we have rated "Sell." Apollo Residential Mortgage (NYSE: AMTG) shares currently have a dividend yield of 17.10%. Apollo Residential Mortgage, Inc. operates as a residential real estate trust that invests in, finances, and manages residential mortgage assets in the United States. Its investment portfolio includes agency and non-agency residential mortgage-backed securities. The company has a P/E ratio of 2.53. The average volume for Apollo Residential Mortgage has been 658,300 shares per day over the past 30 days. Apollo Residential Mortgage has a market cap of $525.4 million and is part of the real estate industry. Shares are down 20.6% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Apollo Residential Mortgage as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share and unimpressive growth in net income. Highlights from the ratings report include:
- APOLLO RESIDENTIAL MTG INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. For the next year, the market is expecting a contraction of 65.8% in earnings ($2.80 versus $8.19).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 73.5% when compared to the same quarter one year ago, falling from $20.12 million to $5.34 million.
- The share price of APOLLO RESIDENTIAL MTG INC has not done very well: it is down 20.91% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter.
- The gross profit margin for APOLLO RESIDENTIAL MTG INC is currently very high, coming in at 85.26%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, AMTG's net profit margin of 13.95% significantly trails the industry average.
- Net operating cash flow has significantly increased by 161.21% to $19.12 million when compared to the same quarter last year. In addition, APOLLO RESIDENTIAL MTG INC has also vastly surpassed the industry average cash flow growth rate of -19.11%.
- You can view the full Apollo Residential Mortgage Ratings Report.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Personal Products industry. The net income has significantly decreased by 152.0% when compared to the same quarter one year ago, falling from $0.30 million to -$0.16 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Personal Products industry and the overall market, CCA INDUSTRIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $0.21 million or 88.77% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- CCA INDUSTRIES INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Stable Earnings per share over the past year indicate the company has sound management over its earnings and share float. During the past fiscal year, CCA INDUSTRIES INC reported lower earnings of $0.06 versus $0.07 in the prior year.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 25.96%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 150.00% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- You can view the full CCA Industries Ratings Report.
- The share price of ARES COMMERCIAL REAL ESTATE has not done very well: it is down 21.14% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 35.6% when compared to the same quarter one year ago, falling from $0.51 million to $0.33 million.
- ARES COMMERCIAL REAL ESTATE's earnings per share declined by 33.3% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($0.61 versus $0.10).
- The gross profit margin for ARES COMMERCIAL REAL ESTATE is rather high; currently it is at 54.57%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, ACRE's net profit margin of 4.87% is significantly lower than the industry average.
- Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ARES COMMERCIAL REAL ESTATE underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Ares Commercial Real Estate Ratings Report.
- Our dividend calendar.