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." New York Mortgage (NASDAQ: NYMT) shares currently have a dividend yield of 19.40%. New York Mortgage Trust, Inc., a real estate investment trust (REIT), engages in acquiring, investing in, financing, and managing mortgage-related and financial assets in the United States. The company has a P/E ratio of 6.79. The average volume for New York Mortgage has been 1,217,500 shares per day over the past 30 days. New York Mortgage has a market cap of $355.1 million and is part of the real estate industry. Shares are down 11.9% year to date as of the close of trading on Tuesday. TheStreet Ratings rates New York Mortgage as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including poor profit margins, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- NYMT's very impressive revenue growth greatly exceeded the industry average of 10.6%. Since the same quarter one year prior, revenues leaped by 162.8%. 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.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, NEW YORK MORTGAGE TRUST INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- The share price of NEW YORK MORTGAGE TRUST INC has not done very well: it is down 12.11% 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 fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The gross profit margin for NEW YORK MORTGAGE TRUST INC is rather low; currently it is at 20.46%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 16.60% significantly trails the industry average.
- You can view the full New York Mortgage Ratings Report.