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."
Dividend Yield: 11.60%
Dynex Capital, Inc., a mortgage real estate investment trust (REIT), invests in mortgage assets in the United States. The company has a P/E ratio of 12.27.
The average volume for Dynex Capital has been 357,800 shares per day over the past 30 days. Dynex Capital has a market cap of $469.9 million and is part of the real estate industry. Shares are up 7.5% year-to-date as of the close of trading on Friday.
TheStreet Ratings rates Dynex Capital as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.
Highlights from the ratings report include:
- Net operating cash flow has slightly increased to $49.90 million or 9.90% when compared to the same quarter last year. Despite an increase in cash flow, DYNEX CAPITAL INC's cash flow growth rate is still lower than the industry average growth rate of 29.99%.
- The gross profit margin for DYNEX CAPITAL INC is currently very high, coming in at 83.12%. Regardless of DX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DX's net profit margin of -3.00% significantly underperformed when compared to the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 103.7% when compared to the same quarter one year ago, falling from $19.60 million to -$0.73 million.
- 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, DYNEX CAPITAL INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Dynex Capital Ratings Report.