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 13.00%. Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The company has a P/E ratio of 6.68. The average volume for Arlington Asset Investment has been 211,400 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $520.1 million and is part of the real estate industry. Shares are up 2.8% year-to-date as of the close of trading on Wednesday. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more. 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 stock price during the past year, increase in net income and growth in earnings per share. 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 2.6%. 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.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
- 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 ($4.47 versus $2.96).
- You can view the full Arlington Asset Investment Ratings Report.
- PFLT's very impressive revenue growth greatly exceeded the industry average of 2.6%. Since the same quarter one year prior, revenues leaped by 84.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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 125.7% when compared to the same quarter one year prior, rising from $3.21 million to $7.24 million.
- The gross profit margin for PENNANTPARK FLOATING RT CAP is rather high; currently it is at 61.50%. Regardless of PFLT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PFLT's net profit margin of 94.93% significantly outperformed against the industry.
- 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 Capital Markets industry and the overall market on the basis of return on equity, PENNANTPARK FLOATING RT CAP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- PENNANTPARK FLOATING RT CAP has improved earnings per share by 8.9% 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, PENNANTPARK FLOATING RT CAP reported lower earnings of $1.30 versus $1.75 in the prior year. For the next year, the market is expecting a contraction of 18.8% in earnings ($1.06 versus $1.30).
- You can view the full PennantPark Floating Rate Capital Ratings Report.
- The revenue growth came in higher than the industry average of 9.4%. Since the same quarter one year prior, revenues rose by 19.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has increased to $174.04 million or 40.00% when compared to the same quarter last year. In addition, FERRELLGAS PARTNERS -LP has also vastly surpassed the industry average cash flow growth rate of -20.24%.
- FERRELLGAS PARTNERS -LP's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, FERRELLGAS PARTNERS -LP turned its bottom line around by earning $0.68 versus -$0.14 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $0.68).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Gas Utilities industry average. The net income increased by 1.6% when compared to the same quarter one year prior, going from $44.68 million to $45.39 million.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full Ferrellgas Partners Ratings Report.
- Our dividend calendar.