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 8.41. The average volume for MFA Financial has been 1,917,600 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 12.5% year-to-date as of the close of trading on Friday. 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 weak operating cash flow 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 6.1%. Since the same quarter one year prior, revenues slightly increased by 3.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 0.8% when compared to the same quarter one year prior, going from $78.88 million to $79.51 million.
- MFA has underperformed the S&P 500 Index, declining 17.27% 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.
- Net operating cash flow has decreased to $36.43 million or 41.75% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full MFA Financial Ratings Report.
- 45.78% is the gross profit margin for LEXMARK INTL INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.75% is in-line with the industry average.
- The revenue fell significantly faster than the industry average of 25.2%. Since the same quarter one year prior, revenues slightly dropped by 5.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- LEXMARK INTL INC 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, LEXMARK INTL INC reported lower earnings of $1.20 versus $4.10 in the prior year. This year, the market expects an improvement in earnings ($3.46 versus $1.20).
- 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 Computers & Peripherals industry and the overall market, LEXMARK INTL INC's return on equity significantly trails that of both the industry average and the S&P 500.
- 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 Computers & Peripherals industry. The net income has significantly decreased by 143.8% when compared to the same quarter one year ago, falling from $34.70 million to -$15.20 million.
- You can view the full Lexmark International Ratings Report.
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Commercial Banks industry average. The net income increased by 4.1% when compared to the same quarter one year prior, going from $2,352.00 million to $2,449.00 million.
- ROYAL BANK OF CANADA's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, ROYAL BANK OF CANADA increased its bottom line by earning $6.01 versus $5.49 in the prior year.
- Net operating cash flow has significantly increased by 270.93% to $17,408.00 million when compared to the same quarter last year. Despite an increase in cash flow, ROYAL BANK OF CANADA's cash flow growth rate is still lower than the industry average growth rate of 315.10%.
- 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 Commercial Banks industry and the overall market, ROYAL BANK OF CANADA's return on equity exceeds that of both the industry average and the S&P 500.
- RY has underperformed the S&P 500 Index, declining 22.67% 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.
- You can view the full Royal Bank Of Canada Ratings Report.
- Our dividend calendar.