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." Preferred Apartment Communities Dividend Yield: 7.30% Preferred Apartment Communities (NYSE: APTS) shares currently have a dividend yield of 7.30%. Preferred Apartment Communities, Inc. is a real estate investment trust launched and managed by Preferred Apartment Advisors, LLC. The fund invests in real estate markets of the United States. It primarily acquires and operates multifamily apartment properties. The average volume for Preferred Apartment Communities has been 127,100 shares per day over the past 30 days. Preferred Apartment Communities has a market cap of $235.1 million and is part of the real estate industry. Shares are up 14.6% 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 Preferred Apartment Communities as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- APTS's very impressive revenue growth greatly exceeded the industry average of 6.1%. Since the same quarter one year prior, revenues leaped by 127.2%. 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.
- Compared to its closing price of one year ago, APTS's share price has jumped by 25.83%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- 38.93% is the gross profit margin for PREFERRED APARTMENT CMNTYS which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, APTS's net profit margin of -5.61% significantly underperformed when compared to the industry average.
- PREFERRED APARTMENT CMNTYS's earnings per share declined by 6.9% in the most recent quarter compared to 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, PREFERRED APARTMENT CMNTYS continued to lose money by earning -$0.27 versus -$2.10 in the prior year. For the next year, the market is expecting a contraction of 192.6% in earnings (-$0.79 versus -$0.27).
- 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, PREFERRED APARTMENT CMNTYS's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Preferred Apartment Communities Ratings Report.
- OFS's very impressive revenue growth greatly exceeded the industry average of 5.9%. Since the same quarter one year prior, revenues leaped by 73.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- OFS CAPITAL CORP 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, OFS CAPITAL CORP increased its bottom line by earning $1.03 versus $0.81 in the prior year. This year, the market expects an improvement in earnings ($1.31 versus $1.03).
- The gross profit margin for OFS CAPITAL CORP is rather high; currently it is at 67.87%. Regardless of OFS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, OFS's net profit margin of 91.58% significantly outperformed against the industry.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, OFS CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- OFS has underperformed the S&P 500 Index, declining 9.00% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- You can view the full OFS Capital Ratings Report.
- The revenue growth came in higher than the industry average of 15.4%. Since the same quarter one year prior, revenues slightly increased by 3.3%. 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.
- NMM's debt-to-equity ratio of 0.81 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.89 is weak.
- 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 Marine industry and the overall market on the basis of return on equity, NAVIOS MARITIME PARTNERS LP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Net operating cash flow has decreased to $28.62 million or 11.01% when compared to the same quarter last year. Despite a decrease in cash flow of 11.01%, NAVIOS MARITIME PARTNERS LP is still significantly exceeding the industry average of -83.99%.
- You can view the full Navios Maritime Partners L.P Ratings Report.
- Our dividend calendar.