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 "Hold." Capstead Mortgage Dividend Yield: 10.50% Capstead Mortgage (NYSE: CMO) shares currently have a dividend yield of 10.50%. Capstead Mortgage Corporation operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 10.02. The average volume for Capstead Mortgage has been 840,900 shares per day over the past 30 days. Capstead Mortgage has a market cap of $1.2 billion and is part of the real estate industry. Shares are up 4% 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 Capstead Mortgage as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and attractive valuation levels. However, as a counter to these strengths, we find that the company's return on equity has been disappointing. Highlights from the ratings report include:
- 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 22.3% when compared to the same quarter one year prior, going from $29.89 million to $36.56 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.6%. Since the same quarter one year prior, revenues rose by 10.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has slightly increased to $64.50 million or 1.62% when compared to the same quarter last year. Despite an increase in cash flow, CAPSTEAD MORTGAGE CORP's cash flow growth rate is still lower than the industry average growth rate of 19.03%.
- CAPSTEAD MORTGAGE CORP 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, CAPSTEAD MORTGAGE CORP reported lower earnings of $0.93 versus $1.50 in the prior year. This year, the market expects an improvement in earnings ($1.42 versus $0.93).
- 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CAPSTEAD MORTGAGE CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Capstead Mortgage Ratings Report.