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." Capstead Mortgage Corporation (NYSE: CMO) shares currently have a dividend yield of 9.70%. Capstead Mortgage Corporation operates as a real estate investment trust in the United States. The company has a P/E ratio of 13.73. The average volume for Capstead Mortgage Corporation has been 918,400 shares per day over the past 30 days. Capstead Mortgage Corporation has a market cap of $1.2 billion and is part of the real estate industry. Shares are up 4.9% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Capstead Mortgage Corporation as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, expanding profit margins and increase in stock price during the past year. However, as a counter to these strengths, we find that the company's return on equity has been disappointing. Highlights from the ratings report include:
- The gross profit margin for CAPSTEAD MORTGAGE CORP is currently very high, coming in at 93.21%. Regardless of CMO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CMO's net profit margin of 63.18% significantly outperformed against the industry.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.
- CMO, with its decline in revenue, underperformed when compared the industry average of 6.8%. Since the same quarter one year prior, revenues slightly dropped by 4.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CAPSTEAD MORTGAGE CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Capstead Mortgage Corporation Ratings Report.
- RAS's revenue growth has slightly outpaced the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 15.0%. 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.
- 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. 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.
- RAIT FINANCIAL TRUST 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, RAIT FINANCIAL TRUST reported poor results of -$4.58 versus -$3.92 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus -$4.58).
- 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 179.2% when compared to the same quarter one year ago, falling from -$46.09 million to -$128.71 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 other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RAIT FINANCIAL TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Rait Financial Ratings Report.
- CORR's very impressive revenue growth greatly exceeded the industry average of 16.9%. Since the same quarter one year prior, revenues leaped by 294.5%. 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.
- 40.40% is the gross profit margin for CORENERGY INFRASTRUCTURE TR which we consider to be strong. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, CORR's net profit margin of 5.39% significantly trails the industry average.
- CORENERGY INFRASTRUCTURE TR 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CORENERGY INFRASTRUCTURE TR increased its bottom line by earning $1.35 versus $0.31 in the prior year. For the next year, the market is expecting a contraction of 88.9% in earnings ($0.15 versus $1.35).
- Net operating cash flow has significantly decreased to -$1.89 million or 277.61% 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, CORR 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, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full CorEnergy Infrastructure Ratings Report.
- Our dividend calendar.