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 "Buy." Arlington Asset Investment (NYSE: AI) shares currently have a dividend yield of 13.40%. Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The company has a P/E ratio of 6.49. The average volume for Arlington Asset Investment has been 219,000 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $503.4 million and is part of the real estate industry. Shares are up 0.5% year-to-date as of the close of trading on Monday. TheStreet Ratings rates Arlington Asset Investment as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, increase in net income, growth in earnings per share and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- AI's very impressive revenue growth greatly exceeded the industry average of 2.9%. Since the same quarter one year prior, revenues leaped by 219.3%. 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 Capital Markets industry. The net income increased by 489.8% when compared to the same quarter one year prior, rising from $3.19 million to $18.84 million.
- The gross profit margin for ARLINGTON ASSET INVESTMENT is currently very high, coming in at 88.47%. It has increased significantly from the same period last year. Along with this, the net profit margin of 49.61% significantly outperformed against the industry average.
- ARLINGTON ASSET INVESTMENT 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, ARLINGTON ASSET INVESTMENT reported lower earnings of $2.96 versus $15.11 in the prior year. This year, the market expects an improvement in earnings ($4.45 versus $2.96).
- In its most recent trading session, AI 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full Arlington Asset Investment Ratings Report.
- UAN's debt-to-equity ratio is very low at 0.29 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.70, which clearly demonstrates the ability to cover short-term cash needs.
- 42.85% is the gross profit margin for CVR PARTNERS LP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, UAN's net profit margin of 26.71% significantly outperformed against the industry.
- UAN, with its decline in revenue, slightly underperformed the industry average of 8.5%. Since the same quarter one year prior, revenues slightly dropped by 1.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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. Compared to other companies in the Chemicals industry and the overall market, CVR PARTNERS LP's return on equity exceeds that of both the industry average and the S&P 500.
- CVR PARTNERS LP's earnings per share declined by 40.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CVR PARTNERS LP increased its bottom line by earning $1.62 versus $1.53 in the prior year. For the next year, the market is expecting a contraction of 15.4% in earnings ($1.37 versus $1.62).
- You can view the full CVR Partners Ratings Report.
- VLCCF's very impressive revenue growth greatly exceeded the industry average of 10.1%. Since the same quarter one year prior, revenues leaped by 210.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.30, is low and is below the industry average, implying that there has been successful management of debt levels.
- The gross profit margin for KNIGHTSBRIDGE TANKERS LTD is currently very high, coming in at 76.92%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 53.31% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 334.08% to $14.75 million when compared to the same quarter last year. In addition, KNIGHTSBRIDGE TANKERS LTD has also vastly surpassed the industry average cash flow growth rate of -91.77%.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Marine industry. The net income increased by 254.5% when compared to the same quarter one year prior, rising from -$6.94 million to $10.72 million.
- You can view the full Knightsbridge Tankers Ratings Report.
- Our dividend calendar.