Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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 "Buy."Apollo Commercial Real Estate Finance (NYSE: ARI) shares currently have a dividend yield of 9.80%. Apollo Commercial Real Estate Finance, Inc. operates as a commercial real estate finance company in the United States. The company has a P/E ratio of 15.02. The average volume for Apollo Commercial Real Estate Finance has been 200,700 shares per day over the past 30 days. Apollo Commercial Real Estate Finance has a market cap of $603.8 million and is part of the real estate industry. Shares are up 1.2% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Apollo Commercial Real Estate Finance as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 9.6%. Since the same quarter one year prior, revenues rose by 31.1%. 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 gross profit margin for APOLLO COMMERCIAL RE FIN INC is currently very high, coming in at 77.54%. Regardless of ARI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ARI's net profit margin of 65.56% significantly outperformed against the industry.
- The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry average. The net income increased by 5.6% when compared to the same quarter one year prior, going from $12.21 million to $12.90 million.
- APOLLO COMMERCIAL RE FIN INC's earnings per share declined by 44.2% in the most recent quarter compared to 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, APOLLO COMMERCIAL RE FIN INC increased its bottom line by earning $1.68 versus $1.34 in the prior year. For the next year, the market is expecting a contraction of 13.4% in earnings ($1.46 versus $1.68).
- In its most recent trading session, ARI has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full Apollo Commercial Real Estate Finance Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 424.6% when compared to the same quarter one year prior, rising from $5.47 million to $28.68 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Capital Markets industry and the overall market, GLADSTONE CAPITAL CORP's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for GLADSTONE CAPITAL CORP is rather high; currently it is at 69.23%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 306.61% significantly outperformed against the industry average.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full Gladstone Capital Ratings Report.
- AMERIGAS PARTNERS -LP has improved earnings per share by 26.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, AMERIGAS PARTNERS -LP turned its bottom line around by earning $1.43 versus -$0.05 in the prior year. This year, the market expects an improvement in earnings ($2.77 versus $1.43).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Gas Utilities industry average. The net income increased by 28.9% when compared to the same quarter one year prior, rising from -$76.00 million to -$54.06 million.
- APU's revenue growth trails the industry average of 15.1%. Since the same quarter one year prior, revenues slightly increased by 4.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Gas Utilities industry and the overall market, AMERIGAS PARTNERS -LP's return on equity exceeds that of both the industry average and the S&P 500.
- 45.29% is the gross profit margin for AMERIGAS PARTNERS -LP which we consider to be strong. Regardless of APU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, APU's net profit margin of -10.16% significantly underperformed when compared to the industry average.
- You can view the full AmeriGas Partners Ratings Report.
- Our dividend calendar.