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."Apollo Commercial Real Estate Finance (NYSE: ARI) shares currently have a dividend yield of 9.70%. Apollo Commercial Real Estate Finance, Inc. The company has a P/E ratio of 12.21. The average volume for Apollo Commercial Real Estate Finance has been 433,400 shares per day over the past 30 days. Apollo Commercial Real Estate Finance has a market cap of $760.8 million and is part of the real estate industry. Shares are up 1.2% year-to-date as of the close of trading on Monday. TheStreet Ratings rates Apollo Commercial Real Estate Finance as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, attractive valuation levels, expanding profit margins 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:
- ARI's revenue growth has slightly outpaced the industry average of 10.1%. Since the same quarter one year prior, revenues rose by 16.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for APOLLO COMMERCIAL RE FIN INC is currently very high, coming in at 81.06%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 83.08% significantly outperformed against the industry average.
- 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 Real Estate Investment Trusts (REITs) industry average. The net income increased by 47.3% when compared to the same quarter one year prior, rising from $11.93 million to $17.58 million.
- APOLLO COMMERCIAL RE FIN INC has improved earnings per share by 27.3% 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, APOLLO COMMERCIAL RE FIN INC reported lower earnings of $1.26 versus $1.68 in the prior year. This year, the market expects an improvement in earnings ($1.60 versus $1.26).
- You can view the full Apollo Commercial Real Estate Finance Ratings Report.
- The revenue growth greatly exceeded the industry average of 3.3%. Since the same quarter one year prior, revenues rose by 31.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- DMLP 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 25.85, which clearly demonstrates the ability to cover short-term cash needs.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, DORCHESTER MINERALS -LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for DORCHESTER MINERALS -LP is currently very high, coming in at 91.70%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 74.38% significantly outperformed against the industry average.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- You can view the full Dorchester Minerals Ratings Report.
- The revenue growth came in higher than the industry average of 5.1%. Since the same quarter one year prior, revenues rose by 22.1%. 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.
- The gross profit margin for NEW MOUNTAIN FINANCE CORP is rather high; currently it is at 63.71%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 77.23% significantly outperformed against the industry average.
- The change in net income from the same quarter one year ago has exceeded that of the Capital Markets industry average, but is less than that of the S&P 500. The net income has decreased by 2.8% when compared to the same quarter one year ago, dropping from $24.56 million to $23.88 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 Capital Markets industry and the overall market on the basis of return on equity, NEW MOUNTAIN FINANCE CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, NMFC has underperformed the S&P 500 Index, declining 8.58% 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 New Mountain Finance Ratings Report.
- Our dividend calendar.