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: 8.80% America First Multifamily Investors (NASDAQ: ATAX) shares currently have a dividend yield of 8.80%. 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 30.00. The average volume for America First Multifamily Investors has been 91,900 shares per day over the past 30 days. America First Multifamily Investors has a market cap of $343.4 million and is part of the real estate industry. Shares are up 8.4% 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 a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- ATAX's revenue growth has slightly outpaced the industry average of 9.2%. Since the same quarter one year prior, revenues slightly increased by 0.8%. 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 121.09% to $4.17 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 -233.37%.
- The gross profit margin for AMERICA FIRST MULTIFAMILY-LP is currently very high, coming in at 77.77%. Regardless of ATAX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ATAX's net profit margin of 18.96% compares favorably to 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. Compared to other companies in the Thrifts & Mortgage Finance industry and the overall market on the basis of return on equity, AMERICA FIRST MULTIFAMILY-LP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The share price of AMERICA FIRST MULTIFAMILY-LP has not done very well: it is down 5.32% 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 America First Multifamily Investors Ratings Report.
- The revenue growth came in higher than the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 23.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for KCAP FINANCIAL INC is currently very high, coming in at 76.76%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 62.15% significantly outperformed against the industry average.
- KCAP FINANCIAL INC reported significant earnings per share improvement 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, KCAP FINANCIAL INC reported lower earnings of $0.43 versus $0.53 in the prior year. This year, the market expects an improvement in earnings ($0.71 versus $0.43).
- KCAP has underperformed the S&P 500 Index, declining 20.84% 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.
- Net operating cash flow has significantly decreased to -$6.56 million or 166.57% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full KCAP Financial Ratings Report.
- The revenue growth greatly exceeded the industry average of 8.5%. Since the same quarter one year prior, revenues rose by 42.8%. 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.
- The gross profit margin for RESOURCE CAPITAL CORP is rather high; currently it is at 62.86%. Regardless of RSO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RSO's net profit margin of 27.32% compares favorably to the industry average.
- 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 $17.52 million to $15.49 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 on the basis of return on equity, RESOURCE CAPITAL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Resource Capital Ratings Report.
- Our dividend calendar.