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 "Sell." Aviv REIT (NYSE: AVIV) shares currently have a dividend yield of 5.00%. No company description available. The company has a P/E ratio of 27.65. The average volume for Aviv REIT has been 351,500 shares per day over the past 30 days. Aviv REIT has a market cap of $1.4 billion and is part of the real estate industry. Shares are up 20.4% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates Aviv REIT as a sell. The area that we feel has been the company's primary weakness has been its relatively poor performance when compared with the S&P 500 during the past year. Highlights from the ratings report include:
- 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, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
- When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, AVIV REIT INC's return on equity is below that of both the industry average and the S&P 500.
- The gross profit margin for AVIV REIT INC is rather high; currently it is at 58.66%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 20.94% trails the industry average.
- Net operating cash flow has significantly increased by 4612.22% to $16.24 million when compared to the same quarter last year. In addition, AVIV REIT INC has also vastly surpassed the industry average cash flow growth rate of 29.99%.
- You can view the full Aviv REIT Ratings Report.