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."MFA Financial Dividend Yield: 11.40% MFA Financial (NYSE: MFA) shares currently have a dividend yield of 11.40%. MFA Financial, Inc., a real estate investment trust (REIT), invests in residential agency and non-agency mortgage-backed securities (MBS), and residential whole loans in the United States (the U.S.). The company has a P/E ratio of 8.69. The average volume for MFA Financial has been 2,077,800 shares per day over the past 30 days. MFA Financial has a market cap of $2.6 billion and is part of the real estate industry. Shares are down 10.3% 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 MFA Financial as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.7%. Since the same quarter one year prior, revenues slightly increased by 4.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- Net operating cash flow has slightly increased to $70.94 million or 6.35% when compared to the same quarter last year. Despite an increase in cash flow, MFA FINANCIAL INC's average is still marginally south of the industry average growth rate of 16.09%.
- MFA has underperformed the S&P 500 Index, declining 15.53% 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.
- 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 0.8% when compared to the same quarter one year ago, dropping from $78.73 million to $78.07 million.
- You can view the full MFA Financial Ratings Report.
- Net operating cash flow has significantly increased by 79.03% to $266.40 million when compared to the same quarter last year. In addition, ENBRIDGE ENERGY PRTNRS -LP has also vastly surpassed the industry average cash flow growth rate of -19.81%.
- 44.57% is the gross profit margin for ENBRIDGE ENERGY PRTNRS -LP which we consider to be strong. 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 -5.36% is in-line with the industry average.
- ENBRIDGE ENERGY PRTNRS -LP 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. 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, ENBRIDGE ENERGY PRTNRS -LP turned its bottom line around by earning $0.67 versus -$0.38 in the prior year. This year, the market expects an improvement in earnings ($0.89 versus $0.67).
- The debt-to-equity ratio of 1.30 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.23, which clearly demonstrates the inability to cover short-term cash needs.
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 200.6% when compared to the same quarter one year ago, falling from $70.10 million to -$70.50 million.
- You can view the full Enbridge Energy Partners Ratings Report.
- KRG's very impressive revenue growth greatly exceeded the industry average of 9.7%. Since the same quarter one year prior, revenues leaped by 105.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- KITE REALTY GROUP TRUST reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, KITE REALTY GROUP TRUST continued to lose money by earning -$0.30 versus -$0.40 in the prior year. This year, the market expects an improvement in earnings ($0.09 versus -$0.30).
- KRG has underperformed the S&P 500 Index, declining 11.15% 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.
- The gross profit margin for KITE REALTY GROUP TRUST is rather low; currently it is at 19.59%. Regardless of KRG's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, KRG's net profit margin of 8.03% is significantly lower than the industry average.
- You can view the full Kite Realty Group Ratings Report.
- Our dividend calendar.