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 "Sell." Ellington Residential Mortgage REIT (NYSE: EARN) shares currently have a dividend yield of 12.70%. No company description available. The company has a P/E ratio of 5.10. The average volume for Ellington Residential Mortgage REIT has been 63,100 shares per day over the past 30 days. Ellington Residential Mortgage REIT has a market cap of $158.0 million and is part of the real estate industry. Shares are up 12.9% year-to-date as of the close of trading on Friday. 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 Ellington Residential Mortgage REIT as a sell. The area that we feel has been the company's primary weakness has been its feeble growth in its earnings per share. Highlights from the ratings report include:
- Compared to where it was a year ago today, the stock is now trading at a higher level, and has traded in line with the S&P 500. Regardless of the rise in share value over the previous year, we feel that the risks involved in investing in this stock do not compensate for any future upside potential.
- ELLINGTON RESIDENTIAL MTG reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($2.64 versus -$0.82).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 213.9% when compared to the same quarter one year prior, rising from -$9.70 million to $11.05 million.
- Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ELLINGTON RESIDENTIAL MTG has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full Ellington Residential Mortgage REIT Ratings Report.