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 "Hold."Mid-America Apartment Communities (NYSE: MAA) shares currently have a dividend yield of 4.20%. Mid-America Apartment Communities, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in acquisition, redevelopment, new development, property management, and disposition of multifamily apartment communities. The company has a P/E ratio of 195.03. The average volume for Mid-America Apartment Communities has been 501,800 shares per day over the past 30 days. Mid-America Apartment Communities has a market cap of $5.3 billion and is part of the real estate industry. Shares are up 16.4% year-to-date as of the close of trading on Monday. TheStreet Ratings rates Mid-America Apartment Communities as a hold. Among the primary strengths of the company is its robust revenue growth -- not just in the most recent periods but in previous quarters as well. At the same time, however, we also find weaknesses including feeble growth in the company's earnings per share, unimpressive growth in net income and disappointing return on equity. Highlights from the ratings report include:
- MAA's very impressive revenue growth greatly exceeded the industry average of 8.3%. Since the same quarter one year prior, revenues leaped by 90.3%. 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.
- In its most recent trading session, MAA 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. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- MID-AMERICA APT CMNTYS 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 suffered a declining pattern earnings per share over the past two years. During the past fiscal year, MID-AMERICA APT CMNTYS INC reported lower earnings of $0.98 versus $1.42 in the prior year.
- 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 on the basis of return on equity, MID-AMERICA APT CMNTYS INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for MID-AMERICA APT CMNTYS INC is rather low; currently it is at 18.42%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 6.10% significantly trails the industry average.
- You can view the full Mid-America Apartment Communities Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the Commercial Banks industry average, but is less than that of the S&P 500. The net income increased by 8.1% when compared to the same quarter one year prior, going from $31.31 million to $33.84 million.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 11.5%. Since the same quarter one year prior, revenues slightly dropped by 6.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- VALLEY NATIONAL BANCORP has improved earnings per share by 6.3% 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, VALLEY NATIONAL BANCORP reported lower earnings of $0.67 versus $0.74 in the prior year. For the next year, the market is expecting a contraction of 14.9% in earnings ($0.57 versus $0.67).
- 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 Commercial Banks industry and the overall market on the basis of return on equity, VALLEY NATIONAL BANCORP 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 Valley National Bancorp Ratings Report.
- The revenue growth came in higher than the industry average of 7.9%. Since the same quarter one year prior, revenues rose by 13.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- APOLLO INVESTMENT CORP 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, APOLLO INVESTMENT CORP turned its bottom line around by earning $0.49 versus -$0.45 in the prior year. This year, the market expects an improvement in earnings ($0.90 versus $0.49).
- 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 Capital Markets industry and the overall market on the basis of return on equity, APOLLO INVESTMENT CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- AINV has underperformed the S&P 500 Index, declining 6.98% 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.
- Net operating cash flow has significantly decreased to -$122.64 million or 450.50% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Apollo Investment Ratings Report.
- Our dividend calendar.