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." New Residential Investment Dividend Yield: 11.00% New Residential Investment (NYSE: NRZ) shares currently have a dividend yield of 11.00%. New Residential Investment Corp., a real estate investment trust, focuses on investing in residential mortgage related assets. It operates through Servicing Related Assets, Residential Securities and Loans, and Other Investments segments. The company has a P/E ratio of 5.34. The average volume for New Residential Investment has been 1,859,500 shares per day over the past 30 days. New Residential Investment has a market cap of $1.8 billion and is part of the real estate industry. Shares are down 5.5% 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 New Residential Investment as a sell. Among the areas we feel are negative, one of the most important has been the company's poor growth in earnings per share. Highlights from the ratings report include:
- NEW RESIDENTIAL INV CP's earnings per share improvement from the most recent quarter was slightly positive. For the next year, the market is expecting a contraction of 26.7% in earnings ($0.72 versus $0.98).
- In its most recent trading session, NRZ 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. 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.
- The gross profit margin for NEW RESIDENTIAL INV CP is currently very high, coming in at 88.95%. Regardless of NRZ's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NRZ's net profit margin of 45.75% significantly outperformed against the industry.
- Net operating cash flow has improved to $25.37 million from having none in the same quarter last year. Since the company had no net operating cash flow for the prior period, we cannot calculate a percent change in order to compare its growth rate with that of its industry average.
- You can view the full New Residential Investment Ratings Report.