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."American Capital Agency Dividend Yield: 11.80% American Capital Agency (NASDAQ: AGNC) shares currently have a dividend yield of 11.80%. American Capital Agency Corp. operates as a real estate investment trust (REIT). The average volume for American Capital Agency has been 4,609,400 shares per day over the past 30 days. American Capital Agency has a market cap of $7.9 billion and is part of the real estate industry. Shares are up 16.9% 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 American Capital Agency as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and feeble growth in its earnings per share. Highlights from the ratings report include:
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN CAPITAL AGENCY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- AMERICAN CAPITAL AGENCY 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, AMERICAN CAPITAL AGENCY CORP reported lower earnings of $3.17 versus $4.40 in the prior year. For the next year, the market is expecting a contraction of 68.1% in earnings ($1.01 versus $3.17).
- In its most recent trading session, AGNC 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. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
- The gross profit margin for AMERICAN CAPITAL AGENCY CORP is currently very high, coming in at 90.57%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, AGNC's net profit margin of 53.09% significantly outperformed against the industry.
- 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 128.1% when compared to the same quarter one year prior, rising from -$701.00 million to $197.00 million.
- You can view the full American Capital Agency Ratings Report.
- LINE has underperformed the S&P 500 Index, declining 21.48% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- LINN ENERGY LLC 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, LINN ENERGY LLC reported poor results of -$2.78 versus -$1.86 in the prior year. This year, the market expects an improvement in earnings ($1.55 versus -$2.78).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 86.7% when compared to the same quarter one year prior, rising from -$30.06 million to -$4.00 million.
- Net operating cash flow has increased to $520.18 million or 37.19% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -2.53%.
- LINE's very impressive revenue growth greatly exceeded the industry average of 6.7%. Since the same quarter one year prior, revenues leaped by 183.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- You can view the full Linn Energy Ratings Report.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, TALISMAN ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $458.00 million or 28.10% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- TLM's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 54.31%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- TALISMAN ENERGY INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, TALISMAN ENERGY INC reported poor results of -$1.21 versus -$0.02 in the prior year.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.7%. Since the same quarter one year prior, revenues slightly dropped by 3.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full Talisman Energy Ratings Report.
- Our dividend calendar.