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: 12.90% Arlington Asset Investment (NYSE: AI) shares currently have a dividend yield of 12.90%. Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The company has a P/E ratio of 6.72. The average volume for Arlington Asset Investment has been 285,000 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $522.6 million and is part of the real estate industry. Shares are up 2.7% 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 net income, increase in stock price during the past year 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 2.5%. 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.
- 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.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
- 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 ($4.67 versus $2.96).
- You can view the full Arlington Asset Investment Ratings Report.
- The revenue growth came in higher than the industry average of 9.0%. 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 26.46%.
- 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).
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 25.83% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the 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.
- TNH has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.66, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for TERRA NITROGEN CO -LP is rather high; currently it is at 66.09%. Regardless of TNH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TNH's net profit margin of 59.76% significantly outperformed against the industry.
- TNH, with its decline in revenue, underperformed when compared the industry average of 7.6%. Since the same quarter one year prior, revenues fell by 22.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Chemicals industry and the overall market, TERRA NITROGEN CO -LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 30.09%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 30.39% compared to the year-earlier quarter. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.
- You can view the full Terra Nitrogen Ratings Report.
- Our dividend calendar.