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."Arlington Asset Investment Dividend Yield: 18.50% Arlington Asset Investment (NYSE: AI) shares currently have a dividend yield of 18.50%. Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The average volume for Arlington Asset Investment has been 307,000 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $309.2 million and is part of the real estate industry. Shares are up 1.3% 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 Arlington Asset Investment as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The gross profit margin for ARLINGTON ASSET INVESTMENT is currently very high, coming in at 111.30%. It has increased significantly from the same period last year. Along with this, the net profit margin of 183.23% significantly outperformed against the industry average.
- Net operating cash flow has increased to $35.60 million or 27.78% when compared to the same quarter last year. Despite an increase in cash flow of 27.78%, ARLINGTON ASSET INVESTMENT is still growing at a significantly lower rate than the industry average of 272.65%.
- AI, with its very weak revenue results, has greatly underperformed against the industry average of 5.7%. Since the same quarter one year prior, revenues plummeted by 209.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Capital Markets industry. The net income has significantly decreased by 509.7% when compared to the same quarter one year ago, falling from $12.85 million to -$52.63 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 Capital Markets industry and the overall market, ARLINGTON ASSET INVESTMENT's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Arlington Asset Investment Ratings Report.
- The revenue growth came in higher than the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 22.5%. 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.
- The gross profit margin for SOLAR SENIOR CAPITAL LTD is currently very high, coming in at 76.38%. Regardless of SUNS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SUNS's net profit margin of -22.92% significantly underperformed when compared to the industry average.
- SOLAR SENIOR CAPITAL LTD 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, SOLAR SENIOR CAPITAL LTD reported lower earnings of $1.02 versus $1.11 in the prior year. This year, the market expects an improvement in earnings ($1.33 versus $1.02).
- 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 Capital Markets industry. The net income has significantly decreased by 185.6% when compared to the same quarter one year ago, falling from $1.75 million to -$1.50 million.
- 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. When compared to other companies in the Capital Markets industry and the overall market, SOLAR SENIOR CAPITAL LTD's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Solar Senior Capital Ratings Report.
- The revenue growth came in higher than the industry average of 18.1%. Since the same quarter one year prior, revenues slightly increased by 6.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.80, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 2.70, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has increased to $41.40 million or 10.40% when compared to the same quarter last year. Despite an increase in cash flow, CINER RESOURCES LP's average is still marginally south of the industry average growth rate of 13.58%.
- The gross profit margin for CINER RESOURCES LP is currently lower than what is desirable, coming in at 32.54%. Regardless of CINR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CINR's net profit margin of 11.15% compares favorably to the industry average.
- CINR has underperformed the S&P 500 Index, declining 7.66% 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 Ciner Resources Ratings Report.
- Our dividend calendar.