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."Arlington Asset Investment Dividend Yield: 13.90% Arlington Asset Investment (NYSE: AI) shares currently have a dividend yield of 13.90%. Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The company has a P/E ratio of 87.00. The average volume for Arlington Asset Investment has been 294,400 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $576.8 million and is part of the real estate industry. Shares are down 6.1% 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 Arlington Asset Investment as a hold. Among the primary strengths of the company is its generally strong cash flow from operations. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- Net operating cash flow has increased to $22.43 million or 13.20% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -6.01%.
- AI, with its very weak revenue results, has greatly underperformed against the industry average of 12.8%. Since the same quarter one year prior, revenues plummeted by 75.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- ARLINGTON ASSET INVESTMENT has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ARLINGTON ASSET INVESTMENT reported lower earnings of $0.53 versus $2.96 in the prior year. This year, the market expects an improvement in earnings ($4.89 versus $0.53).
- 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 Capital Markets industry and the overall market on the basis of return on equity, ARLINGTON ASSET INVESTMENT underperformed against that of the industry average and is significantly less than that of the S&P 500.
- In its most recent trading session, AI 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. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full Arlington Asset Investment Ratings Report.
- The revenue growth came in higher than the industry average of 2.6%. Since the same quarter one year prior, revenues rose by 25.7%. 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.
- Net operating cash flow has increased to $54.42 million or 24.49% when compared to the same quarter last year. In addition, CONSOLIDATED COMM HLDGS INC has also vastly surpassed the industry average cash flow growth rate of -27.09%.
- The gross profit margin for CONSOLIDATED COMM HLDGS INC is rather high; currently it is at 59.68%. Regardless of CNSL's high profit margin, it has managed to decrease from the same period last year.
- The debt-to-equity ratio is very high at 4.24 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, CNSL has a quick ratio of 0.66, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, CONSOLIDATED COMM HLDGS INC'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 Consolidated Communications Ratings Report.
- IRT's very impressive revenue growth greatly exceeded the industry average of 3.1%. Since the same quarter one year prior, revenues leaped by 183.8%. 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.
- 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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- 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 38.6% when compared to the same quarter one year ago, falling from $0.31 million to $0.19 million.
- The gross profit margin for INDEPENDENCE REALTY TRUST is rather low; currently it is at 19.44%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.15% significantly trails the industry average.
- You can view the full Independence Realty Ratings Report.
- Our dividend calendar.