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: 13.70% Arlington Asset Investment (NYSE: AI) shares currently have a dividend yield of 13.70%. Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The company has a P/E ratio of 88.00. The average volume for Arlington Asset Investment has been 316,400 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $583.4 million and is part of the real estate industry. Shares are down 4.6% year-to-date as of the close of trading on Tuesday. 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 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. In addition, ARLINGTON ASSET INVESTMENT has also modestly surpassed the industry average cash flow growth rate of 5.95%.
- AI, with its very weak revenue results, has greatly underperformed against the industry average of 13.2%. 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 ($4.90 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, ARLINGTON ASSET INVESTMENT's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of ARLINGTON ASSET INVESTMENT has not done very well: it is down 10.20% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
- MSB's very impressive revenue growth greatly exceeded the industry average of 18.7%. Since the same quarter one year prior, revenues leaped by 85.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MSB 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 1.31, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for MESABI TRUST is currently very high, coming in at 100.00%. MSB has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, MSB's net profit margin of 97.94% significantly outperformed against the industry.
- 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 Metals & Mining industry and the overall market, MESABI TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- MSB has underperformed the S&P 500 Index, declining 17.28% 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.
- You can view the full Mesabi Ratings Report.
- ELRC's revenue growth has slightly outpaced the industry average of 3.7%. Since the same quarter one year prior, revenues slightly increased by 5.4%. 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.
- ELRC's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- The gross profit margin for ELECTRO RENT CORP is rather high; currently it is at 60.32%. Regardless of ELRC'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 7.86% trails the industry average.
- 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 Electronic Equipment, Instruments & Components industry and the overall market, ELECTRO RENT CORP's return on equity is below that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $10.56 million or 14.50% 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.
- You can view the full Electro Rent Ratings Report.
- Our dividend calendar.