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 Dividend Yield: 12.70% Arlington Asset Investment (NYSE: AI) shares currently have a dividend yield of 12.70%. Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The company has a P/E ratio of 6.82. The average volume for Arlington Asset Investment has been 277,300 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $531.1 million and is part of the real estate industry. Shares are up 2.6% 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 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 3.0%. 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 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.
- 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.
- 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 ($4.65 versus $2.96).
- You can view the full Arlington Asset Investment Ratings Report.
- The revenue growth came in higher than the industry average of 9.1%. 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. The firm also exceeded the industry average cash flow growth rate of 27.60%.
- 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 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.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Gas Utilities industry average, but is greater than that of the S&P 500. 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.
- You can view the full Ferrellgas Partners Ratings Report.
- TCRD's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 4.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has significantly increased by 130.02% to $13.16 million when compared to the same quarter last year. In addition, THL CREDIT INC has also vastly surpassed the industry average cash flow growth rate of -89.01%.
- The gross profit margin for THL CREDIT INC is rather high; currently it is at 67.49%. Regardless of TCRD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TCRD's net profit margin of 39.09% significantly outperformed against the industry.
- THL CREDIT INC 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, THL CREDIT INC increased its bottom line by earning $1.45 versus $1.26 in the prior year. For the next year, the market is expecting a contraction of 4.1% in earnings ($1.39 versus $1.45).
- The share price of THL CREDIT INC has not done very well: it is down 11.72% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full THL Credit Ratings Report.
- Our dividend calendar.