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.