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 "Sell." CYS Investments (NYSE: CYS) shares currently have a dividend yield of 17.00%. CYS Investments, Inc., a specialty finance company, makes leveraged investments in whole-pool residential mortgage pass-through securities where the principal and interest payments are guaranteed. The average volume for CYS Investments has been 3,480,300 shares per day over the past 30 days. CYS Investments has a market cap of $1.3 billion and is part of the real estate industry. Shares are down 31.9% year to date as of the close of trading on Friday. TheStreet Ratings rates CYS Investments as a sell. Among the areas we feel are negative, one of the most important has been the company's poor growth in earnings per share. Highlights from the ratings report include:
- CYS INVESTMENTS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, CYS INVESTMENTS INC reported lower earnings of $2.75 versus $3.63 in the prior year. For the next year, the market is expecting a contraction of 49.5% in earnings ($1.39 versus $2.75).
- The net income has significantly decreased by 87.4% when compared to the same quarter one year ago, falling from $241.91 million to $30.57 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation.
- Compared to where it was trading one year ago, CYS is down 35.62% to its most recent closing price of 7.99. Looking ahead, our view is that this stock still does not have good upside potential and may even suffer further declines.
- The gross profit margin for CYS INVESTMENTS INC is currently very high, coming in at 93.46%. It has increased from the same quarter the previous year.
- You can view the full CYS Investments Ratings Report.