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."Apollo Investment Dividend Yield: 10.30% Apollo Investment (NASDAQ: AINV) shares currently have a dividend yield of 10.30%. Apollo Investment Corporation is business development company and operates as a closed-end management investment company. The company invests in middle market companies. It provides direct equity capital, mezzanine and senior secured loans, and subordinated debt and loans. The company has a P/E ratio of 6.55. The average volume for Apollo Investment has been 2,065,000 shares per day over the past 30 days. Apollo Investment has a market cap of $1.8 billion and is part of the financial services industry. Shares are up 5.1% year-to-date as of the close of trading on Monday. EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE. TheStreet Ratings rates Apollo Investment as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 13.0%. Since the same quarter one year prior, revenues rose by 16.4%. 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 significantly increased by 139.87% to $48.91 million when compared to the same quarter last year. In addition, APOLLO INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of 3.62%.
- The gross profit margin for APOLLO INVESTMENT CORP is rather high; currently it is at 69.96%. Regardless of AINV's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AINV's net profit margin of -17.67% significantly underperformed when compared to the industry average.
- 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 Capital Markets industry. The net income has significantly decreased by 118.4% when compared to the same quarter one year ago, falling from $105.74 million to -$19.45 million.
- 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. When compared to other companies in the Capital Markets industry and the overall market, APOLLO INVESTMENT CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Apollo Investment Ratings Report.
- RESI's very impressive revenue growth greatly exceeded the industry average of 10.0%. Since the same quarter one year prior, revenues leaped by 191.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ALTISOURCE RESIDENTIAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- ALTISOURCE RESIDENTIAL CORP has improved earnings per share by 44.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ALTISOURCE RESIDENTIAL CORP increased its bottom line by earning $3.33 versus $1.16 in the prior year. For the next year, the market is expecting a contraction of 60.7% in earnings ($1.31 versus $3.33).
- RESI'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 27.84%, 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. 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.
- You can view the full Altisource Residential Corporation Ratings Report.
- The gross profit margin for TWO HARBORS INVESTMENT CORP is currently very high, coming in at 81.98%. Regardless of TWO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TWO's net profit margin of -22.34% significantly underperformed when compared to the industry average.
- 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 115.4% when compared to the same quarter one year ago, falling from $239.41 million to -$36.96 million.
- 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 on the basis of return on equity, TWO HARBORS INVESTMENT CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Two Harbors Investment Ratings Report.
- Our dividend calendar.