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 "Sell."ZAIS Financial Dividend Yield: 10.60% ZAIS Financial (NYSE: ZFC) shares currently have a dividend yield of 10.60%. Zais Financial Corp. originates, acquires, finances, sells, services, and manages residential mortgage loans in the United States. It originates mortgage loans through its GMFS mortgage banking platform; and acquires performing, re-performing, and newly originated loans through other channels. The company has a P/E ratio of 107.79. The average volume for ZAIS Financial has been 27,700 shares per day over the past 30 days. ZAIS Financial has a market cap of $120.3 million and is part of the real estate industry. Shares are down 12.6% year-to-date as of the close of trading on Wednesday. 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 ZAIS Financial as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. Highlights from the ratings report include:
- 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 625.3% when compared to the same quarter one year ago, falling from $1.15 million to -$6.04 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ZAIS FINANCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of ZAIS FINANCIAL CORP has not done very well: it is down 14.50% 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. 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.
- ZAIS FINANCIAL CORP 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ZAIS FINANCIAL CORP increased its bottom line by earning $2.91 versus $0.81 in the prior year. For the next year, the market is expecting a contraction of 40.5% in earnings ($1.73 versus $2.91).
- ZFC, with its decline in revenue, underperformed when compared the industry average of 6.0%. Since the same quarter one year prior, revenues fell by 12.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full ZAIS Financial Ratings Report.
- The gross profit margin for JP ENERGY PARTNERS LP is currently extremely low, coming in at 6.07%. Regardless of JPEP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -1.44% trails the industry average.
- Despite the weak revenue results, JPEP has outperformed against the industry average of 37.2%. Since the same quarter one year prior, revenues fell by 23.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- JPEP's debt-to-equity ratio is very low at 0.23 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.88 is somewhat weak and could be cause for future problems.
- Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, JP ENERGY PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- JPEP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 57.36%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter.
- You can view the full JP Energy Partners Ratings Report.
- CNNX's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.40 is very weak and demonstrates a lack of ability to pay short-term obligations.
- The gross profit margin for CONE MIDSTREAM PARTNERS LP is rather high; currently it is at 69.84%. It has increased significantly from the same period last year. Along with this, the net profit margin of 36.57% significantly outperformed against the industry average.
- This stock's share value has moved by only 57.00% over the past year.
- CONE MIDSTREAM PARTNERS LP has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. This year, the market expects an improvement in earnings ($1.07 versus $0.26).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 2.2% when compared to the same quarter one year prior, going from $19.24 million to $19.66 million.
- You can view the full CONE Midstream Partners Ratings Report.
- Our dividend calendar.