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."Capstead Mortgage Dividend Yield: 10.50% Capstead Mortgage (NYSE: CMO) shares currently have a dividend yield of 10.50%. Capstead Mortgage Corporation operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 9.23. The average volume for Capstead Mortgage has been 735,100 shares per day over the past 30 days. Capstead Mortgage has a market cap of $1.1 billion and is part of the real estate industry. Shares are down 4% year-to-date as of the close of trading on Thursday. 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 Capstead Mortgage as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The gross profit margin for CAPSTEAD MORTGAGE CORP is currently very high, coming in at 94.05%. Regardless of CMO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CMO's net profit margin of 57.75% significantly outperformed against the industry.
- CMO, with its decline in revenue, slightly underperformed the industry average of 8.5%. Since the same quarter one year prior, revenues slightly dropped by 1.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Net operating cash flow has declined marginally to $58.85 million or 4.15% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, CAPSTEAD MORTGAGE CORP has marginally lower results.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income has decreased by 11.5% when compared to the same quarter one year ago, dropping from $38.39 million to $33.96 million.
- You can view the full Capstead Mortgage Ratings Report.
- The revenue growth greatly exceeded the industry average of 5.8%. Since the same quarter one year prior, revenues rose by 36.6%. 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.
- The gross profit margin for WHITEHORSE FINANCE INC is rather high; currently it is at 62.14%. Regardless of WHF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WHF's net profit margin of 42.34% significantly outperformed against the industry.
- WHITEHORSE FINANCE INC's earnings per share declined by 25.6% 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, WHITEHORSE FINANCE INC increased its bottom line by earning $1.32 versus $1.26 in the prior year. This year, the market expects an improvement in earnings ($1.41 versus $1.32).
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Capital Markets industry average. The net income has significantly decreased by 25.1% when compared to the same quarter one year ago, falling from $6.37 million to $4.77 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. When compared to other companies in the Capital Markets industry and the overall market, WHITEHORSE FINANCE INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full WhiteHorse Finance Ratings Report.
- The revenue growth greatly exceeded the industry average of 8.5%. Since the same quarter one year prior, revenues rose by 45.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- CORENERGY INFRASTRUCTURE TR reported flat earnings per share in the most recent quarter. 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, CORENERGY INFRASTRUCTURE TR increased its bottom line by earning $0.23 versus $0.18 in the prior year. This year, the market expects an improvement in earnings ($0.27 versus $0.23).
- In its most recent trading session, CORR has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
- Net operating cash flow has decreased to $6.16 million or 24.06% 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 CorEnergy Infrastructure Ratings Report.
- Our dividend calendar.