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." Apollo Residential Mortgage Dividend Yield: 10.80% Apollo Residential Mortgage (NYSE: AMTG) shares currently have a dividend yield of 10.80%. Apollo Residential Mortgage, Inc. primarily invests in residential mortgage assets in the United States. The company has a P/E ratio of 6.64. The average volume for Apollo Residential Mortgage has been 313,500 shares per day over the past 30 days. Apollo Residential Mortgage has a market cap of $521.7 million and is part of the real estate industry. Shares are up 9.9% 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 Apollo Residential Mortgage as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow and feeble growth in its earnings per share. Highlights from the ratings report include:
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income has decreased by 6.9% when compared to the same quarter one year ago, dropping from $11.69 million to $10.88 million.
- Net operating cash flow has decreased to $13.48 million or 28.60% 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.
- APOLLO RESIDENTIAL MTG INC's earnings per share declined by 8.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, APOLLO RESIDENTIAL MTG INC swung to a loss, reporting -$1.91 versus $8.19 in the prior year. This year, the market expects an improvement in earnings ($2.06 versus -$1.91).
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, APOLLO RESIDENTIAL MTG INC's return on equity is below that of both the industry average and the S&P 500.
- 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. Regardless of the rise in share value over the previous year, we feel that the risks involved in investing in this stock do not compensate for any future upside potential.
- You can view the full Apollo Residential Mortgage Ratings Report.