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 9.60%. 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 15.28. The average volume for Apollo Commercial Real Estate Finance has been 216,100 shares per day over the past 30 days. Apollo Commercial Real Estate Finance has a market cap of $614.5 million and is part of the real estate industry. Shares are up 4% year-to-date as of the close of trading on Tuesday. 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 7.3%. 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 net income growth from the same quarter one year ago has exceeded that of the Real Estate Investment Trusts (REITs) industry average, but is less than that of the S&P 500. 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).
- The share price of APOLLO COMMERCIAL RE FIN INC has not done very well: it is down 5.73% 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. 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 revenue growth greatly exceeded the industry average of 17.1%. Since the same quarter one year prior, revenues rose by 14.3%. 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 FIDUS INVESTMENT CORP is rather high; currently it is at 68.82%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 44.20% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 367.12% to $35.26 million when compared to the same quarter last year. In addition, FIDUS INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of -113.53%.
- 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 Capital Markets industry and the overall market on the basis of return on equity, FIDUS INVESTMENT CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full Fidus Investment Ratings Report.
- Compared to its closing price of one year ago, NMM's share price has jumped by 25.55%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- NMM's debt-to-equity ratio of 0.75 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.38 is very high and demonstrates very strong liquidity.
- The gross profit margin for NAVIOS MARITIME PARTNERS LP is currently very high, coming in at 91.59%. Regardless of NMM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NMM's net profit margin of 19.41% compares favorably to the industry average.
- NMM, with its decline in revenue, underperformed when compared the industry average of 11.6%. Since the same quarter one year prior, revenues slightly dropped by 1.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full Navios Maritime Partners L.P Ratings Report.
- Our dividend calendar.