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 "Buy."Arlington Asset Investment (NYSE: AI) shares currently have a dividend yield of 13.40%. Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The company has a P/E ratio of 9.08. The average volume for Arlington Asset Investment has been 288,400 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $499.0 million and is part of the real estate industry. Shares are down 1.1% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates Arlington Asset Investment as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- Net operating cash flow has significantly increased by 166.10% to $19.82 million when compared to the same quarter last year. In addition, ARLINGTON ASSET INVESTMENT has also vastly surpassed the industry average cash flow growth rate of 96.60%.
- 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.
- ARLINGTON ASSET INVESTMENT 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 suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, ARLINGTON ASSET INVESTMENT reported lower earnings of $2.96 versus $15.11 in the prior year. This year, the market expects an improvement in earnings ($3.82 versus $2.96).
- The revenue fell significantly faster than the industry average of 10.4%. 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.
- 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.
- You can view the full Arlington Asset Investment Ratings Report.
- The revenue growth greatly exceeded the industry average of 7.5%. Since the same quarter one year prior, revenues rose by 22.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 105.6% when compared to the same quarter one year prior, rising from -$35.01 million to $1.96 million.
- Net operating cash flow has slightly increased to $31.37 million or 7.31% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -22.86%.
- CAPITAL PRODUCT PARTNERS LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. During the past fiscal year, CAPITAL PRODUCT PARTNERS LP turned its bottom line around by earning $0.99 versus -$0.45 in the prior year.
- You can view the full Capital Product Partners Ratings Report.
- The revenue growth greatly exceeded the industry average of 7.3%. Since the same quarter one year prior, revenues rose by 27.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MID-CON ENERGY PARTNERS -LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income increased by 35.1% when compared to the same quarter one year prior, rising from $6.91 million to $9.34 million.
- Net operating cash flow has increased to $14.15 million or 42.45% when compared to the same quarter last year. In addition, MID-CON ENERGY PARTNERS -LP has also vastly surpassed the industry average cash flow growth rate of -22.60%.
- The gross profit margin for MID-CON ENERGY PARTNERS -LP is currently very high, coming in at 74.34%. Regardless of MCEP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MCEP's net profit margin of 42.35% significantly outperformed against the industry.
- You can view the full Mid-Con Energy Partners Ratings Report.
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