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."America First Multifamily Investors (NASDAQ: ATAX) shares currently have a dividend yield of 8.30%. 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 18.84. The average volume for America First Multifamily Investors has been 353,000 shares per day over the past 30 days. America First Multifamily Investors has a market cap of $354.3 million and is part of the real estate industry. Shares are down 4.6% year-to-date as of the close of trading on Friday. 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 15.74% 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. Compared to other companies in the Thrifts & Mortgage Finance industry and the overall market on the basis of return on equity, AMERICA FIRST MULTIFAMILY-LP has outperformed in comparison with the industry average, but has underperformed when compared to that of 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. Along with this, the net profit margin of 34.94% is above that of 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 915.71%.
- You can view the full America First Multifamily Investors Ratings Report.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, WHEELER REAL ESTATE INVT TR's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for WHEELER REAL ESTATE INVT TR is currently lower than what is desirable, coming in at 26.12%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, WHLR's net profit margin of -6.77% significantly underperformed when compared to the industry average.
- WHLR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 25.09%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
- WHEELER REAL ESTATE INVT TR reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, WHEELER REAL ESTATE INVT TR reported poor results of -$0.94 versus -$0.27 in the prior year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 40.4% when compared to the same quarter one year prior, rising from -$0.40 million to -$0.24 million.
- You can view the full Wheeler Real Estate Investment Ratings Report.
- In its most recent trading session, STB 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, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Road & Rail industry average. The net income has decreased by 2.6% when compared to the same quarter one year ago, dropping from $2.98 million to $2.90 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 Road & Rail industry and the overall market, STUDENT TRANSPORTATION INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for STUDENT TRANSPORTATION INC is currently lower than what is desirable, coming in at 25.07%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.14% significantly trails the industry average.
- Currently the debt-to-equity ratio of 1.60 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, STB's quick ratio is somewhat strong at 1.13, demonstrating the ability to handle short-term liquidity needs.
- You can view the full Student Transportation Ratings Report.
- Our dividend calendar.