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."Mid-America Apartment Communities (NYSE: MAA) shares currently have a dividend yield of 4.10%. Mid-America Apartment Communities, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in acquisition, redevelopment, new development, property management, and disposition of multifamily apartment communities. The company has a P/E ratio of 169.17. The average volume for Mid-America Apartment Communities has been 472,900 shares per day over the past 30 days. Mid-America Apartment Communities has a market cap of $5.3 billion and is part of the real estate industry. Shares are up 17% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Mid-America Apartment Communities as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- MAA's very impressive revenue growth greatly exceeded the industry average of 9.5%. Since the same quarter one year prior, revenues leaped by 88.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, MID-AMERICA APT CMNTYS INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for MID-AMERICA APT CMNTYS INC is currently lower than what is desirable, coming in at 26.33%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 12.72% significantly trails the industry average.
- You can view the full Mid-America Apartment Communities Ratings Report.
- Compared to its closing price of one year ago, IEP's share price has jumped by 38.54%, exceeding the performance of the broader market during that same time frame. 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.
- ICAHN ENTERPRISES LP 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 reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ICAHN ENTERPRISES LP increased its bottom line by earning $8.98 versus $3.72 in the prior year. This year, the market expects an improvement in earnings ($9.41 versus $8.98).
- The gross profit margin for ICAHN ENTERPRISES LP is rather low; currently it is at 20.18%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -0.58% trails that of the industry average.
- Net operating cash flow has significantly decreased to -$802.00 million or 2056.09% 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 Icahn Ratings Report.
- The gross profit margin for PENNYMAC MORTGAGE INVEST TR is rather high; currently it is at 65.82%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 39.29% significantly outperformed against the industry average.
- PMT, with its decline in revenue, underperformed when compared the industry average of 9.5%. Since the same quarter one year prior, revenues fell by 19.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- PENNYMAC MORTGAGE INVEST TR's earnings per share declined by 44.4% 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, PENNYMAC MORTGAGE INVEST TR reported lower earnings of $3.02 versus $3.08 in the prior year. For the next year, the market is expecting a contraction of 22.1% in earnings ($2.35 versus $3.02).
- 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 28.9% when compared to the same quarter one year ago, falling from $53.30 million to $37.87 million.
- You can view the full PennyMac Mortgage Investment Ratings Report.
- Our dividend calendar.