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." Investors Real Estate Dividend Yield: 7.20% Investors Real Estate (NYSE: IRET) shares currently have a dividend yield of 7.20%. Investors Real Estate Trust is a real estate investment trust. The trust invests in real estate markets of United States. It is primarily engaged in investment and operation of the the real estate assets. The average volume for Investors Real Estate has been 427,300 shares per day over the past 30 days. Investors Real Estate has a market cap of $880.3 million and is part of the real estate industry. Shares are down 13.8% 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 Investors Real Estate as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 139.0% when compared to the same quarter one year prior, rising from $3.50 million to $8.37 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.5%. Since the same quarter one year prior, revenues slightly increased by 6.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- INVESTORS REAL ESTATE TRUST has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. 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, INVESTORS REAL ESTATE TRUST swung to a loss, reporting -$0.28 versus $0.09 in the prior year. This year, the market expects an improvement in earnings ($0.08 versus -$0.28).
- The gross profit margin for INVESTORS REAL ESTATE TRUST is currently lower than what is desirable, coming in at 30.93%. Regardless of IRET's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, IRET's net profit margin of 11.39% is significantly lower than the industry average.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, INVESTORS REAL ESTATE TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Investors Real Estate 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 24.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- AMERICAN CAPITAL SR FLTG LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.26 versus $0.37).
- Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, AMERICAN CAPITAL SR FLTG LTD underperformed against that of the industry average and is significantly less than that of the S&P 500.
- In its most recent trading session, ACSF 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. 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 American Capital Senior Floating Ratings Report.
- UMH's revenue growth has slightly outpaced the industry average of 8.5%. Since the same quarter one year prior, revenues rose by 11.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 26.6% when compared to the same quarter one year prior, rising from $0.57 million to $0.72 million.
- In its most recent trading session, UMH 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.
- The gross profit margin for UMH PROPERTIES INC is rather low; currently it is at 18.88%. Regardless of UMH's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, UMH's net profit margin of 3.59% is significantly lower than the industry average.
- You can view the full UMH Properties Ratings Report.
- Our dividend calendar.