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." MFA Financial (NYSE: MFA) shares currently have a dividend yield of 9.60%. MFA Financial, Inc., a real estate investment trust (REIT), invests in residential agency and non-agency mortgage-backed securities (MBS). The company has a P/E ratio of 10.81. The average volume for MFA Financial has been 2,817,300 shares per day over the past 30 days. MFA Financial has a market cap of $3.1 billion and is part of the real estate industry. Shares are up 17.6% year-to-date as of the close of trading on Friday. TheStreet Ratings rates MFA Financial as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- MFA's revenue growth trails the industry average of 10.3%. Since the same quarter one year prior, revenues slightly increased by 0.3%. 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 MFA FINANCIAL INC is currently very high, coming in at 91.61%. Regardless of MFA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MFA's net profit margin of 61.07% significantly outperformed against the industry.
- 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, MFA FINANCIAL INC's return on equity is below that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $48.27 million or 32.17% 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 MFA Financial Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 153.0% when compared to the same quarter one year prior, rising from $3.77 million to $9.53 million.
- Net operating cash flow has increased to $45.31 million or 49.25% when compared to the same quarter last year. In addition, CYPRESS SEMICONDUCTOR CORP has also vastly surpassed the industry average cash flow growth rate of -8.13%.
- CYPRESS SEMICONDUCTOR CORP reported significant earnings per share improvement 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, CYPRESS SEMICONDUCTOR CORP reported poor results of -$0.33 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings ($0.53 versus -$0.33).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, CYPRESS SEMICONDUCTOR CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- CY has underperformed the S&P 500 Index, declining 13.85% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- You can view the full Cypress Semiconductor Ratings Report.
- PENNSYLVANIA RE INVS TRUST has improved earnings per share by 18.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, PENNSYLVANIA RE INVS TRUST continued to lose money by earning -$0.58 versus -$0.91 in the prior year. This year, the market expects an improvement in earnings (-$0.21 versus -$0.58).
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.3%. Since the same quarter one year prior, revenues slightly increased by 4.9%. 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 PENNSYLVANIA RE INVS TRUST is currently extremely low, coming in at 10.57%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -7.24% is significantly below that of 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 132.7% when compared to the same quarter one year ago, falling from $24.80 million to -$8.10 million.
- You can view the full Pennsylvania Real Estate Investment Ratings Report.
- Our dividend calendar.