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."Resource Capital Dividend Yield: 16.90% Resource Capital (NYSE: RSO) shares currently have a dividend yield of 16.90%. Resource Capital Corp., a diversified real estate investment trust, primarily focuses on originating, holding, and managing commercial mortgage loans and other commercial real estate-related debt and equity investments in the United States. The company has a P/E ratio of 13.94. The average volume for Resource Capital has been 797,900 shares per day over the past 30 days. Resource Capital has a market cap of $635.5 million and is part of the real estate industry. Shares are down 5.4% 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 Resource Capital as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including 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 Real Estate Investment Trusts (REITs) industry. The net income increased by 996.0% when compared to the same quarter one year prior, rising from $1.17 million to $12.78 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.1%. Since the same quarter one year prior, revenues slightly increased by 7.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for RESOURCE CAPITAL CORP is rather high; currently it is at 52.51%. Regardless of RSO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 28.34% trails the industry average.
- RSO has underperformed the S&P 500 Index, declining 16.17% 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.
- 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RESOURCE CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Resource Capital Ratings Report.
- The gross profit margin for ANWORTH MTG ASSET CORP is currently very high, coming in at 89.29%. Regardless of ANH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ANH's net profit margin of -40.61% 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 228.8% when compared to the same quarter one year ago, falling from $11.09 million to -$14.29 million.
- 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ANWORTH MTG ASSET CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Anworth Mortgage Asset Ratings Report.
- CTCM has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.01, which illustrates the ability to avoid short-term cash problems.
- CTCM, with its decline in revenue, underperformed when compared the industry average of 7.7%. Since the same quarter one year prior, revenues slightly dropped by 7.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 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 Media industry. The net income has significantly decreased by 32.3% when compared to the same quarter one year ago, falling from $46.66 million to $31.60 million.
- Net operating cash flow has significantly decreased to $4.99 million or 68.04% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full CTC Media Ratings Report.
- Our dividend calendar.