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 "Hold."Arlington Asset Investment (NYSE: AI) shares currently have a dividend yield of 13.70%. Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The company has a P/E ratio of 8.36. The average volume for Arlington Asset Investment has been 161,600 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $410.3 million and is part of the real estate industry. Shares are down 1.9% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Arlington Asset Investment as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- The gross profit margin for ARLINGTON ASSET INVESTMENT is rather high; currently it is at 54.48%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, AI's net profit margin of 374.22% significantly outperformed against the industry.
- AI, with its decline in revenue, underperformed when compared the industry average of 17.1%. Since the same quarter one year prior, revenues fell by 46.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, AI 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. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- 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 other companies in the Capital Markets industry and the overall market on the basis of return on equity, ARLINGTON ASSET INVESTMENT has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- 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 Capital Markets industry. The net income has significantly decreased by 77.2% when compared to the same quarter one year ago, falling from $175.80 million to $40.00 million.
- You can view the full Arlington Asset Investment Ratings Report.
- The revenue growth greatly exceeded the industry average of 2.4%. Since the same quarter one year prior, revenues rose by 38.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- PBT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.16, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for PERMIAN BASIN ROYALTY TRUST is currently very high, coming in at 100.00%. PBT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, PBT's net profit margin of 98.85% significantly outperformed against the industry.
- 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 other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PERMIAN BASIN ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- PBT has underperformed the S&P 500 Index, declining 11.30% 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.
- You can view the full Permian Basin Royalty Ratings Report.
- The revenue growth came in higher than the industry average of 7.3%. Since the same quarter one year prior, revenues rose by 20.2%. 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.
- CAMPUS CREST COMMUNITIES 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. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CAMPUS CREST COMMUNITIES INC increased its bottom line by earning $0.16 versus $0.11 in the prior year. This year, the market expects an improvement in earnings ($0.18 versus $0.16).
- 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 46.3% when compared to the same quarter one year ago, falling from $8.99 million to $4.83 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 on the basis of return on equity, CAMPUS CREST COMMUNITIES INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Campus Crest Communities Ratings Report.
- Our dividend calendar.