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."Redwood Dividend Yield: 8.80% Redwood (NYSE: RWT) shares currently have a dividend yield of 8.80%. Redwood Trust, Inc., together with its subsidiaries, focuses on investing in mortgage-and other real estate-related assets; and engaging in residential and commercial mortgage banking activities in the United States. The company has a P/E ratio of 10.83. The average volume for Redwood has been 811,900 shares per day over the past 30 days. Redwood has a market cap of $987.3 million and is part of the real estate industry. Shares are down 4.2% 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 Redwood as a hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income and revenue growth. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year. Highlights from the ratings report include:
- REDWOOD TRUST INC has improved earnings per share by 48.4% 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, REDWOOD TRUST INC increased its bottom line by earning $1.15 versus $1.13 in the prior year. This year, the market expects an improvement in earnings ($1.40 versus $1.15).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 51.2% when compared to the same quarter one year prior, rising from $27.12 million to $41.00 million.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, REDWOOD TRUST INC's return on equity is below that of both the industry average and the S&P 500.
- RWT'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 33.68%, 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. 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.
- You can view the full Redwood Ratings Report.
- MPW's very impressive revenue growth greatly exceeded the industry average of 8.0%. Since the same quarter one year prior, revenues leaped by 59.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MEDICAL PROPERTIES TRUST 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, MEDICAL PROPERTIES TRUST increased its bottom line by earning $0.62 versus $0.28 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $0.62).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, MEDICAL PROPERTIES TRUST's return on equity is below that of both the industry average and the S&P 500.
- MPW has underperformed the S&P 500 Index, declining 13.35% 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 Medical Properties Ratings Report.
- Net operating cash flow has slightly increased to $56.74 million or 1.20% when compared to the same quarter last year. In addition, RETAIL PPTYS OF AMERICA INC has also modestly surpassed the industry average cash flow growth rate of 0.99%.
- RPAI, with its decline in revenue, underperformed when compared the industry average of 8.0%. Since the same quarter one year prior, revenues slightly dropped by 2.6%. The declining revenue appears to have seeped down to the company's 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 88.4% when compared to the same quarter one year ago, falling from $25.87 million to $3.01 million.
- The gross profit margin for RETAIL PPTYS OF AMERICA INC is currently lower than what is desirable, coming in at 26.11%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.01% significantly trails the industry average.
- You can view the full Retail Properties of America Ratings Report.
- Our dividend calendar.