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."New York Mortgage (NASDAQ: NYMT) shares currently have a dividend yield of 14.10%. New York Mortgage Trust, Inc., a real estate investment trust (REIT), is engaged in acquiring, investing in, financing, and managing mortgage-related and financial assets in the United States. The company has a P/E ratio of 7.02. The average volume for New York Mortgage has been 1,103,700 shares per day over the past 30 days. New York Mortgage has a market cap of $693.5 million and is part of the real estate industry. Shares are up 10% year-to-date as of the close of trading on Friday. TheStreet Ratings rates New York Mortgage as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, weak operating cash flow and poor profit margins. Highlights from the ratings report include:
- NYMT's very impressive revenue growth greatly exceeded the industry average of 10.1%. Since the same quarter one year prior, revenues leaped by 65.7%. 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 return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, NEW YORK MORTGAGE TRUST INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Net operating cash flow has decreased to $10.58 million or 10.97% when compared to the same quarter last year. Despite a decrease in cash flow NEW YORK MORTGAGE TRUST INC is still fairing well by exceeding its industry average cash flow growth rate of -37.20%.
- NEW YORK MORTGAGE TRUST INC's earnings per share declined by 6.5% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, NEW YORK MORTGAGE TRUST INC reported lower earnings of $1.11 versus $1.25 in the prior year. For the next year, the market is expecting a contraction of 2.7% in earnings ($1.08 versus $1.11).
- You can view the full New York Mortgage Ratings Report.
- The gross profit margin for ALTO PALERMO SA is rather high; currently it is at 62.40%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.87% is in-line with the industry average.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- ALTO PALERMO SA has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, ALTO PALERMO SA increased its bottom line by earning $1.45 versus $1.19 in the prior year.
- 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 Management & Development industry. The net income has significantly decreased by 104.1% when compared to the same quarter one year ago, falling from $13.99 million to -$0.58 million.
- Net operating cash flow has significantly decreased to $11.09 million or 65.22% 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 Alto Palermo Ratings Report.
- The revenue growth greatly exceeded the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 46.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 131.25% and other important driving factors, this stock has surged by 25.49% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- LRR ENERGY LP 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, LRR ENERGY LP reported poor results of -$1.90 versus $0.00 in the prior year. This year, the market expects an improvement in earnings ($0.98 versus -$1.90).
- The debt-to-equity ratio of 1.34 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, LRE's quick ratio is somewhat strong at 1.26, demonstrating the ability to handle short-term liquidity needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, LRR ENERGY LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full LRR Energy Ratings Report.
- Our dividend calendar.