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: 11.60% MFA Financial (NYSE: MFA) shares currently have a dividend yield of 11.60%. 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 8.51. The average volume for MFA Financial has been 2,219,500 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 12% year-to-date as of the close of trading on Monday. 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 9.8%. 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 16.32%.
- MFA has underperformed the S&P 500 Index, declining 13.75% 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.
- The revenue growth came in higher than the industry average of 6.9%. Since the same quarter one year prior, revenues rose by 20.1%. 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 143.28% to $623.86 million when compared to the same quarter last year. In addition, OAKTREE CAPITAL GROUP LLC has also vastly surpassed the industry average cash flow growth rate of -422.49%.
- OAKTREE CAPITAL GROUP LLC's earnings per share declined by 43.0% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, OAKTREE CAPITAL GROUP LLC reported lower earnings of $3.01 versus $6.43 in the prior year. For the next year, the market is expecting a contraction of 20.3% in earnings ($2.40 versus $3.01).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Capital Markets industry. The net income has significantly decreased by 36.5% when compared to the same quarter one year ago, falling from $31.19 million to $19.81 million.
- You can view the full Oaktree Capital Group Ratings Report.
- The revenue growth came in higher than the industry average of 7.6%. Since the same quarter one year prior, revenues slightly increased by 3.5%. 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 slightly increased to $79.07 million or 7.57% when compared to the same quarter last year. Despite an increase in cash flow, MDU RESOURCES GROUP INC's cash flow growth rate is still lower than the industry average growth rate of 41.82%.
- 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 Multi-Utilities industry. The net income has significantly decreased by 524.4% when compared to the same quarter one year ago, falling from $54.11 million to -$229.60 million.
- The gross profit margin for MDU RESOURCES GROUP INC is currently extremely low, coming in at 10.09%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -23.28% is significantly below that of the industry average.
- You can view the full MDU Resources Group Ratings Report.
- Our dividend calendar.