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."America First Multifamily Investors Dividend Yield: 9.00% America First Multifamily Investors (NASDAQ: ATAX) shares currently have a dividend yield of 9.00%. America First Multifamily Investors, L.P. acquires, holds, sells, and deals in a portfolio of mortgage revenue bonds that have been issued to provide construction and/or permanent financing of multifamily residential apartments. The company has a P/E ratio of 29.26. The average volume for America First Multifamily Investors has been 103,600 shares per day over the past 30 days. America First Multifamily Investors has a market cap of $335.0 million and is part of the real estate industry. Shares are up 5.3% year-to-date as of the close of trading on Friday. 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 America First Multifamily Investors as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 12.8%. Since the same quarter one year prior, revenues rose by 32.8%. 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.
- Net operating cash flow has significantly increased by 82.62% to $6.51 million when compared to the same quarter last year. In addition, AMERICA FIRST MULTIFAMILY-LP has also vastly surpassed the industry average cash flow growth rate of -174.37%.
- The gross profit margin for AMERICA FIRST MULTIFAMILY-LP is currently very high, coming in at 77.72%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 16.13% trails the industry average.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, ATAX has underperformed the S&P 500 Index, declining 7.34% 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 Thrifts & Mortgage Finance industry and the overall market, AMERICA FIRST MULTIFAMILY-LP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full America First Multifamily Investors Ratings Report.
- IRT's very impressive revenue growth greatly exceeded the industry average of 8.5%. Since the same quarter one year prior, revenues leaped by 166.6%. 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.
- INDEPENDENCE REALTY TRUST 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, INDEPENDENCE REALTY TRUST increased its bottom line by earning $0.19 versus $0.06 in the prior year. For the next year, the market is expecting a contraction of 47.4% in earnings ($0.10 versus $0.19).
- The gross profit margin for INDEPENDENCE REALTY TRUST is rather low; currently it is at 17.42%. Regardless of IRT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, IRT's net profit margin of -1.07% 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 107.9% when compared to the same quarter one year ago, falling from $2.94 million to -$0.23 million.
- You can view the full Independence Realty Ratings Report.
- The revenue growth greatly exceeded the industry average of 5.4%. Since the same quarter one year prior, revenues rose by 48.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, HARVEST CAPITAL CREDIT CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Net operating cash flow has slightly increased to -$15.77 million or 8.21% when compared to the same quarter last year. Despite an increase in cash flow of 8.21%, HARVEST CAPITAL CREDIT CORP is still growing at a significantly lower rate than the industry average of 244.87%.
- HARVEST CAPITAL CREDIT CORP reported significant earnings per share improvement 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, HARVEST CAPITAL CREDIT CORP increased its bottom line by earning $1.52 versus $0.47 in the prior year. For the next year, the market is expecting a contraction of 3.3% in earnings ($1.47 versus $1.52).
- HCAP has underperformed the S&P 500 Index, declining 14.12% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- You can view the full Harvest Capital Credit Ratings Report.
- Our dividend calendar.