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." America First Multifamily Investors (NASDAQ: ATAX) shares currently have a dividend yield of 8.40%. America First Multifamily Investors, L.P. acquires, holds, sells, and deals in a portfolio of federally tax-exempt mortgage revenue bonds that have been issued to provide construction and/or permanent financing of multifamily residential apartments. The company has a P/E ratio of 18.53. The average volume for America First Multifamily Investors has been 482,000 shares per day over the past 30 days. America First Multifamily Investors has a market cap of $350.2 million and is part of the real estate industry. Shares are down 5.7% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates America First Multifamily Investors as a sell. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- ATAX has underperformed the S&P 500 Index, declining 18.87% from its price level of one year ago. 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 company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Thrifts & Mortgage Finance industry average, but is greater than that of the S&P 500. The net income increased by 54.2% when compared to the same quarter one year prior, rising from $2.21 million to $3.41 million.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Thrifts & Mortgage Finance industry and the overall market, AMERICA FIRST MULTIFAMILY-LP's return on equity is below that of both the industry average and the S&P 500.
- The gross profit margin for AMERICA FIRST MULTIFAMILY-LP is currently very high, coming in at 73.27%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 34.94% trails the industry average.
- Net operating cash flow has significantly increased by 1007.23% to $4.76 million when compared to the same quarter last year. In addition, AMERICA FIRST MULTIFAMILY-LP has also vastly surpassed the industry average cash flow growth rate of -22.10%.
- You can view the full America First Multifamily Investors 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 Diversified Financial Services industry. The net income has decreased by 24.5% when compared to the same quarter one year ago, dropping from -$0.75 million to -$0.94 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Diversified Financial Services industry and the overall market, LIFE PARTNERS HOLDINGS 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 -$0.31 million or 129.82% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- In its most recent trading session, LPHI 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. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
- LIFE PARTNERS HOLDINGS INC's earnings per share declined by 25.0% in the most recent quarter compared to 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, LIFE PARTNERS HOLDINGS INC continued to lose money by earning -$0.16 versus -$0.17 in the prior year.
- You can view the full Life Partners Holdings Ratings Report.
- GLADSTONE COMMERCIAL CORP 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 two years. We anticipate that this should continue in the coming year. During the past fiscal year, GLADSTONE COMMERCIAL CORP swung to a loss, reporting -$0.05 versus $0.17 in the prior year. For the next year, the market is expecting a contraction of 320.0% in earnings (-$0.21 versus -$0.05).
- 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 68.6% when compared to the same quarter one year ago, falling from $0.99 million to $0.31 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, GLADSTONE COMMERCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- 46.64% is the gross profit margin for GLADSTONE COMMERCIAL CORP which we consider to be strong. Regardless of GOOD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GOOD's net profit margin of 1.92% is significantly lower than the industry average.
- The share price of GLADSTONE COMMERCIAL CORP has not done very well: it is down 7.27% 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.
- You can view the full Gladstone Commercial Corporation Ratings Report.
- Our dividend calendar.