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: 11.80% MFA Financial (NYSE: MFA) shares currently have a dividend yield of 11.80%. MFA Financial, Inc. operates as a real estate investment trust (REIT) in the United States. The company invests in residential mortgage assets, including agency and non-agency mortgage-backed securities (MBS), and residential whole loans, and credit risk transfer securities. The company has a P/E ratio of 8.51. The average volume for MFA Financial has been 2,704,100 shares per day over the past 30 days. MFA Financial has a market cap of $2.5 billion and is part of the real estate industry. Shares are up 4.4% 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 MFA Financial as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income. Highlights from the ratings report include:
- MFA's revenue growth has slightly outpaced the industry average of 7.9%. Since the same quarter one year prior, revenues slightly increased by 9.1%. 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 MFA FINANCIAL INC is currently very high, coming in at 89.42%. Regardless of MFA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MFA's net profit margin of 54.40% significantly outperformed against the industry.
- MFA FINANCIAL INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. Stable earnings per share over the past two years indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than the prior full year. During the past fiscal year, MFA FINANCIAL INC's EPS of $0.80 remained unchanged from the prior years' EPS of $0.80. For the next year, the market is expecting a contraction of 8.1% in earnings ($0.74 versus $0.80).
- The change in net income 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 has decreased by 7.8% when compared to the same quarter one year ago, dropping from $79.71 million to $73.47 million.
- You can view the full MFA Financial Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 132.4% when compared to the same quarter one year prior, rising from -$142.00 million to $46.00 million.
- Along with the very weak revenue results, ETP underperformed when compared to the industry average of 34.6%. Since the same quarter one year prior, revenues plummeted by 56.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- ENERGY TRANSFER PARTNERS -LP 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ENERGY TRANSFER PARTNERS -LP reported lower earnings of $0.05 versus $1.64 in the prior year. This year, the market expects an improvement in earnings ($1.50 versus $0.05).
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 49.44%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 151.85% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, ETP is still more expensive than most of the other companies in its industry.
- The debt-to-equity ratio of 1.38 is relatively high when compared with the industry average, suggesting a need for better debt level management.
- You can view the full Energy Transfer Partners Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 14.7%. Since the same quarter one year prior, revenues slightly increased by 6.2%. 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.
- Net operating cash flow has slightly increased to $340.00 million or 3.65% when compared to the same quarter last year. Despite an increase in cash flow, FRONTIER COMMUNICATIONS CORP's cash flow growth rate is still lower than the industry average growth rate of 46.01%.
- 41.54% is the gross profit margin for FRONTIER COMMUNICATIONS CORP which we consider to be strong. Regardless of FTR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FTR's net profit margin of -7.28% significantly underperformed when compared to the industry average.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, FRONTIER COMMUNICATIONS CORP'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 Diversified Telecommunication Services industry. The net income has significantly decreased by 838.6% when compared to the same quarter one year ago, falling from $13.95 million to -$103.00 million.
- You can view the full Frontier Communications Ratings Report.
- Our dividend calendar.