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: 16.70% Arlington Asset Investment (NYSE: AI) shares currently have a dividend yield of 16.70%. Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The average volume for Arlington Asset Investment has been 303,800 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $479.4 million and is part of the real estate industry. Shares are down 21.2% 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 Arlington Asset Investment as a hold. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, 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 gross profit margin for ARLINGTON ASSET INVESTMENT is currently very high, coming in at 114.77%. It has increased significantly from the same period last year. Along with this, the net profit margin of 188.29% significantly outperformed against the industry average.
- AI, with its very weak revenue results, has greatly underperformed against the industry average of 5.6%. Since the same quarter one year prior, revenues plummeted by 224.8%. 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 ($5.40 versus $0.53).
- 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 699.8% when compared to the same quarter one year ago, falling from $7.03 million to -$42.19 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 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.
- You can view the full Arlington Asset Investment Ratings Report.
- PNNT's revenue growth has slightly outpaced the industry average of 5.6%. Since the same quarter one year prior, revenues rose by 12.6%. 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.
- Net operating cash flow has significantly increased by 292.92% to $56.30 million when compared to the same quarter last year. In addition, PENNANTPARK INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of 190.66%.
- The gross profit margin for PENNANTPARK INVESTMENT CORP is rather high; currently it is at 67.19%. 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 17.29% trails the industry average.
- 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 Capital Markets industry and the overall market, PENNANTPARK INVESTMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of PENNANTPARK INVESTMENT CORP has not done very well: it is down 10.48% 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 Pennant Park Investment Corporation Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Gas Utilities industry. The net income increased by 41.3% when compared to the same quarter one year prior, rising from $60.46 million to $85.46 million.
- Net operating cash flow has significantly increased by 192.62% to $33.11 million when compared to the same quarter last year. In addition, FERRELLGAS PARTNERS -LP has also vastly surpassed the industry average cash flow growth rate of 17.29%.
- FERRELLGAS PARTNERS -LP has improved earnings per share by 23.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FERRELLGAS PARTNERS -LP reported lower earnings of $0.40 versus $0.68 in the prior year. This year, the market expects an improvement in earnings ($0.71 versus $0.40).
- The gross profit margin for FERRELLGAS PARTNERS -LP is rather low; currently it is at 23.02%. Regardless of FGP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, FGP's net profit margin of 12.83% compares favorably to the industry average.
- FGP has underperformed the S&P 500 Index, declining 7.38% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full Ferrellgas Partners Ratings Report.
- Our dividend calendar.