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."Fly Leasing Dividend Yield: 7.60% Fly Leasing (NYSE: FLY) shares currently have a dividend yield of 7.60%. FLY Leasing Limited, together with its subsidiaries, is engaged in purchasing and leasing commercial aircraft under multi-year contracts to various airlines worldwide. As of September 2, 2014, it operated a fleet of 122 commercial jet aircraft. The company has a P/E ratio of 40.94. The average volume for Fly Leasing has been 186,700 shares per day over the past 30 days. Fly Leasing has a market cap of $542.8 million and is part of the diversified services industry. Shares are down 19.7% year-to-date as of the close of trading on Thursday. 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 Fly Leasing 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 also find weaknesses including generally higher debt management risk, disappointing return on equity and a generally disappointing performance in the stock itself. 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 Trading Companies & Distributors industry. The net income increased by 266.4% when compared to the same quarter one year prior, rising from $5.92 million to $21.67 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 5.7%. Since the same quarter one year prior, revenues slightly increased by 1.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has increased to $52.93 million or 12.86% when compared to the same quarter last year. Despite an increase in cash flow, FLY LEASING LTD -ADR's average is still marginally south of the industry average growth rate of 13.79%.
- The debt-to-equity ratio is very high at 3.26 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Trading Companies & Distributors industry and the overall market, FLY LEASING LTD -ADR's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full Fly Leasing Ratings Report.
- IRT's very impressive revenue growth greatly exceeded the industry average of 13.7%. Since the same quarter one year prior, revenues leaped by 172.9%. 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.
- Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, INDEPENDENCE REALTY TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 121.8% when compared to the same quarter one year ago, falling from $0.26 million to -$0.06 million.
- The gross profit margin for INDEPENDENCE REALTY TRUST is rather low; currently it is at 17.02%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -0.42% is significantly below that of the industry average.
- You can view the full Independence Realty Ratings Report.
- The gross profit margin for MID-CON ENERGY PARTNERS -LP is rather high; currently it is at 58.40%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, MCEP's net profit margin of 19.78% significantly outperformed against the industry.
- MCEP, with its decline in revenue, slightly underperformed the industry average of 6.7%. Since the same quarter one year prior, revenues fell by 14.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 25.95%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 66.66% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 63.5% when compared to the same quarter one year ago, falling from $10.54 million to $3.85 million.
- Currently the debt-to-equity ratio of 1.53 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, MCEP maintains a poor quick ratio of 0.71, which illustrates the inability to avoid short-term cash problems.
- You can view the full Mid-Con Energy Partners Ratings Report.
- Our dividend calendar.