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 which could 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."Arbor Realty (NYSE: ABR) shares currently have a dividend yield of 7.70%. Arbor Realty Trust, Inc. operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 16.85. The average volume for Arbor Realty has been 130,200 shares per day over the past 30 days. Arbor Realty has a market cap of $333.6 million and is part of the real estate industry. Shares are up 2.5% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Arbor Realty as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. Highlights from the ratings report include:
- 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, ARBOR REALTY TRUST INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- Net operating cash flow has significantly decreased to $0.00 million or 99.96% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- ABR has underperformed the S&P 500 Index, declining 13.07% 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.
- ARBOR REALTY TRUST INC reported significant earnings per share improvement 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, ARBOR REALTY TRUST INC reported lower earnings of $0.41 versus $0.65 in the prior year. For the next year, the market is expecting a contraction of 26.8% in earnings ($0.30 versus $0.41).
- 48.90% is the gross profit margin for ARBOR REALTY TRUST INC which we consider to be strong. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 15.17% trails the industry average.
- You can view the full Arbor Realty 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 84.7% when compared to the same quarter one year ago, falling from $55.84 million to $8.53 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, APOLLO RESIDENTIAL MTG INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $20.32 million or 23.07% 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.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.00%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 92.34% compared to 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.
- APOLLO RESIDENTIAL MTG 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. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, APOLLO RESIDENTIAL MTG INC swung to a loss, reporting -$1.91 versus $8.19 in the prior year. This year, the market expects an improvement in earnings ($2.09 versus -$1.91).
- You can view the full Apollo Residential Mortgage Ratings Report.
- The debt-to-equity ratio is very high at 2.54 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, LGP maintains a poor quick ratio of 0.72, which illustrates the inability to avoid short-term cash problems.
- The gross profit margin for LEHIGH GAS PARTNERS LP is currently extremely low, coming in at 3.39%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.80% trails that of the industry average.
- 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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 1.9% when compared to the same quarter one year ago, dropping from $4.00 million to $3.92 million.
- LEHIGH GAS PARTNERS LP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, LEHIGH GAS PARTNERS LP increased its bottom line by earning $1.19 versus $0.23 in the prior year. This year, the market expects an improvement in earnings ($1.32 versus $1.19).
- You can view the full Lehigh Gas Partners Ratings Report.
- Our dividend calendar.