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." Altisource Residential Corporation (NYSE: RESI) shares currently have a dividend yield of 6.90%. Altisource Residential Corporation, through its wholly-owned subsidiary, Altisource Residential, L.P., focuses on acquiring, owning, and managing single-family rental properties in the United States. The company has a P/E ratio of 10.39. The average volume for Altisource Residential Corporation has been 582,400 shares per day over the past 30 days. Altisource Residential Corporation has a market cap of $1.5 billion and is part of the real estate industry. Shares are down 12.3% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates Altisource Residential Corporation as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall. Highlights from the ratings report include:
- RESI's very impressive revenue growth greatly exceeded the industry average of 10.3%. Since the same quarter one year prior, revenues leaped by 4818.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 692.30% and other important driving factors, this stock has surged by 43.41% over the past year, outperforming the rise in the S&P 500 Index during the same period. Although RESI had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ALTISOURCE RESIDENTIAL CORP's return on equity is below that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$23.57 million or 1627.78% 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 Altisource Residential Corporation Ratings Report.
- LNCO 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 18.09, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has significantly increased by 269.64% to $93.23 million when compared to the same quarter last year. In addition, LINNCO LLC has also vastly surpassed the industry average cash flow growth rate of 17.51%.
- Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, LINNCO LLC's return on equity significantly trails that of both the industry average and the S&P 500.
- In its most recent trading session, LNCO 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. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 6.9% when compared to the same quarter one year ago, dropping from -$18.22 million to -$19.48 million.
- You can view the full LinnCo Ratings Report.
- APL's very impressive revenue growth greatly exceeded the industry average of 3.2%. Since the same quarter one year prior, revenues leaped by 69.6%. 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 Oil, Gas & Consumable Fuels industry. The net income increased by 115.9% when compared to the same quarter one year prior, rising from -$28.86 million to $4.59 million.
- ATLAS PIPELINE PARTNER LP has improved earnings per share by 43.8% 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, ATLAS PIPELINE PARTNER LP swung to a loss, reporting -$2.19 versus $0.97 in the prior year. This year, the market expects an improvement in earnings (-$0.13 versus -$2.19).
- 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 Oil, Gas & Consumable Fuels industry and the overall market, ATLAS PIPELINE PARTNER LP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for ATLAS PIPELINE PARTNER LP is currently extremely low, coming in at 12.45%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.64% trails that of the industry average.
- You can view the full Atlas Pipeline Partners Ratings Report.
- Our dividend calendar.