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 18.62. The average volume for America First Multifamily Investors has been 354,300 shares per day over the past 30 days. America First Multifamily Investors has a market cap of $352.0 million and is part of the real estate industry. Shares are down 5.2% year-to-date as of the close of trading on Tuesday. 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 16.65% 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 619.74%.
- You can view the full America First Multifamily Investors Ratings Report.
- 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, AMERICAN MIDSTREAM PRTNRS LP'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 $1.16 million or 78.98% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- AMID's debt-to-equity ratio of 0.96 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 0.18 is very low and demonstrates very weak liquidity.
- The gross profit margin for AMERICAN MIDSTREAM PRTNRS LP is currently extremely low, coming in at 7.93%. Regardless of AMID's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -3.35% trails the industry average.
- AMERICAN MIDSTREAM PRTNRS LP 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, AMERICAN MIDSTREAM PRTNRS LP continued to lose money by earning -$0.71 versus -$1.24 in the prior year. For the next year, the market is expecting a contraction of 740.8% in earnings (-$5.97 versus -$0.71).
- You can view the full American Midstream Partners Ratings Report.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Real Estate Investment Trusts (REITs) industry. The net income has decreased by 5.4% when compared to the same quarter one year ago, dropping from $17.85 million to $16.89 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, AG MORTGAGE INVESTMENT TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
- Looking at the price performance of MITT's shares over the past 12 months, there is not much good news to report: the stock is down 29.68%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- AG MORTGAGE INVESTMENT TRUST's earnings per share declined by 22.6% in the most recent quarter compared to 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, AG MORTGAGE INVESTMENT TRUST swung to a loss, reporting -$1.60 versus $7.34 in the prior year. This year, the market expects an improvement in earnings ($2.16 versus -$1.60).
- The revenue fell significantly faster than the industry average of 6.3%. Since the same quarter one year prior, revenues fell by 36.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full AG Mortgage Investment Ratings Report.
- Our dividend calendar.