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."JAVELIN Mortgage Investment Dividend Yield: 17.60% JAVELIN Mortgage Investment (NYSE: JMI) shares currently have a dividend yield of 17.60%. JAVELIN Mortgage Investment Corp., a real estate investment trust (REIT), invests primarily in fixed rate agency, and fixed rate and hybrid adjustable rate non-agency residential mortgage-backed securities in the United States. The company qualifies as a REIT for federal income tax purposes. The average volume for JAVELIN Mortgage Investment has been 67,700 shares per day over the past 30 days. JAVELIN Mortgage Investment has a market cap of $73.0 million and is part of the real estate industry. Shares are down 0.5% year-to-date as of the close of trading on Thursday. 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 JAVELIN Mortgage Investment as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow and generally disappointing historical performance in the stock itself. 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 351.5% when compared to the same quarter one year ago, falling from $6.57 million to -$16.53 million.
- Net operating cash flow has decreased to $6.79 million or 14.01% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 35.65%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 352.72% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, JAVELIN MORTGAGE INVESTMENT's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for JAVELIN MORTGAGE INVESTMENT is currently very high, coming in at 72.52%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, JMI's net profit margin of -247.27% significantly underperformed when compared to the industry average.
- You can view the full JAVELIN Mortgage Investment Ratings Report.
- NORDIC AMERICAN OFFSHORE 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. For the next year, the market is expecting a contraction of 219.3% in earnings (-$0.37 versus $0.31).
- 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 Energy Equipment & Services industry. The net income has significantly decreased by 209.8% when compared to the same quarter one year ago, falling from $2.83 million to -$3.10 million.
- The gross profit margin for NORDIC AMERICAN OFFSHORE is rather low; currently it is at 23.95%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -38.98% is significantly below that of the industry average.
- Net operating cash flow has decreased to $4.35 million or 21.08% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, NORDIC AMERICAN OFFSHORE has marginally lower results.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 66.07%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 208.33% compared to the year-earlier quarter. 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 Nordic American Offshore Ratings Report.
- 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 Metals & Mining industry and the overall market, MCEWEN MINING INC's return on equity significantly trails that of both the industry average and the S&P 500.
- After a year of stock price fluctuations, the net result is that MUX's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. This company's share value has not moved any higher or lower since its value 12 months ago, and we feel the risks associated with investing in this company will outweigh any potential future gains.
- MCEWEN MINING INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MCEWEN MINING INC reported poor results of -$1.04 versus -$0.50 in the prior year. This year, the market expects an improvement in earnings ($0.01 versus -$1.04).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 120.2% when compared to the same quarter one year prior, rising from -$13.03 million to $2.63 million.
- 45.97% is the gross profit margin for MCEWEN MINING INC which we consider to be strong. It has increased significantly from the same period last year.
- You can view the full McEwen Mining Ratings Report.
- Our dividend calendar.