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 8.03. The average volume for Arlington Asset Investment has been 285,900 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $500.1 million and is part of the real estate industry. Shares are down 0.2% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Arlington Asset Investment as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, increase in net income and growth in earnings per share. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- AI's very impressive revenue growth greatly exceeded the industry average of 5.1%. Since the same quarter one year prior, revenues leaped by 274.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 121.4% when compared to the same quarter one year prior, rising from $3.18 million to $7.03 million.
- The gross profit margin for ARLINGTON ASSET INVESTMENT is currently very high, coming in at 76.86%. It has increased significantly from the same period last year. Along with this, the net profit margin of 39.16% significantly outperformed against the industry average.
- ARLINGTON ASSET INVESTMENT 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. But, we feel it is poised for EPS growth in 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 ($4.16 versus $2.96).
- AI has underperformed the S&P 500 Index, declining 6.94% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full Arlington Asset Investment Ratings Report.
- The gross profit margin for BLACKROCK KELSO CAPITAL CORP is rather high; currently it is at 59.66%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 77.50% significantly outperformed against the industry average.
- Net operating cash flow has slightly increased to $52.83 million or 6.49% when compared to the same quarter last year. Despite an increase in cash flow of 6.49%, BLACKROCK KELSO CAPITAL CORP is still growing at a significantly lower rate than the industry average of 162.25%.
- 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, BLACKROCK KELSO CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.1%. Since the same quarter one year prior, revenues slightly dropped by 5.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- BLACKROCK KELSO CAPITAL CORP's earnings per share declined by 25.6% 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, BLACKROCK KELSO CAPITAL CORP increased its bottom line by earning $1.20 versus $0.78 in the prior year. For the next year, the market is expecting a contraction of 31.1% in earnings ($0.83 versus $1.20).
- You can view the full BlackRock Kelso Capital Corporation Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 6.4%. Since the same quarter one year prior, revenues slightly increased by 2.7%. 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.
- MNDO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.20, which clearly demonstrates the ability to cover short-term cash needs.
- 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. 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 gross profit margin for MIND CTI LTD is rather high; currently it is at 63.49%. Regardless of MNDO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 19.99% trails the industry average.
- You can view the full Mind C T I Ratings Report.
- Our dividend calendar.