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 4 stocks with substantial yields, that ultimately, we have rated "Hold." Arbor Realty (NYSE: ABR) shares currently have a dividend yield of 7.10%. Arbor Realty Trust, Inc. operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 29.12. The average volume for Arbor Realty has been 186,600 shares per day over the past 30 days. Arbor Realty has a market cap of $314.0 million and is part of the real estate industry. Shares are up 19.4% year to date as of the close of trading on Friday. TheStreet Ratings rates Arbor Realty as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- ABR's revenue growth has slightly outpaced the industry average of 10.6%. Since the same quarter one year prior, revenues rose by 19.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Compared to its closing price of one year ago, ABR's share price has jumped by 26.38%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- 43.94% is the gross profit margin for ARBOR REALTY TRUST INC which we consider to be strong. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, ABR's net profit margin of 12.54% significantly trails the industry average.
- ARBOR REALTY TRUST 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ARBOR REALTY TRUST INC turned its bottom line around by earning $0.64 versus -$1.53 in the prior year. For the next year, the market is expecting a contraction of 9.4% in earnings ($0.58 versus $0.64).
- 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 73.3% when compared to the same quarter one year ago, falling from $15.55 million to $4.15 million.
- You can view the full Arbor Realty Ratings Report.