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 "Sell." Five Oaks Investment Dividend Yield: 14.90% Five Oaks Investment (NYSE: OAKS) shares currently have a dividend yield of 14.90%. Five Oaks Investment Corp. focuses on investing, financing, and managing a portfolio of mortgage-backed securities (MBS). It invests in agency and non-agency residential MBS, multi-family MBS, residential mortgage loans, mortgage servicing rights, and other mortgage-related investments. The average volume for Five Oaks Investment has been 102,000 shares per day over the past 30 days. Five Oaks Investment has a market cap of $148.2 million and is part of the real estate industry. Shares are down 10.1% 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 Five Oaks Investment as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. Highlights from the ratings report include:
- 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 133.5% when compared to the same quarter one year ago, falling from $10.74 million to -$3.60 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, FIVE OAKS INVESTMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of FIVE OAKS INVESTMENT CORP has not done very well: it is down 13.95% 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. 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.
- FIVE OAKS INVESTMENT CORP 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FIVE OAKS INVESTMENT CORP swung to a loss, reporting -$0.03 versus $0.42 in the prior year. This year, the market expects an improvement in earnings ($1.31 versus -$0.03).
- The gross profit margin for FIVE OAKS INVESTMENT CORP is currently very high, coming in at 83.59%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -12.36% is in-line with the industry average.
- You can view the full Five Oaks Investment Ratings Report.