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."Ellington Financial Dividend Yield: 11.60% Ellington Financial (NYSE: EFC) shares currently have a dividend yield of 11.60%. Ellington Financial LLC, a specialty finance company, acquires and manages mortgage-related assets, including residential mortgage backed securities backed by prime jumbo, Alt-A, manufactured housing and subprime residential mortgage loans, and residential mortgage-backed securities. The company has a P/E ratio of 15.12. The average volume for Ellington Financial has been 84,500 shares per day over the past 30 days. Ellington Financial has a market cap of $570.4 million and is part of the real estate industry. Shares are up 1.6% 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 Ellington Financial as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, deteriorating net income and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- Net operating cash flow has significantly increased by 200.94% to $264.98 million when compared to the same quarter last year. Despite an increase in cash flow of 200.94%, ELLINGTON FINANCIAL LLC is still growing at a significantly lower rate than the industry average of 399.27%.
- The gross profit margin for ELLINGTON FINANCIAL LLC is rather high; currently it is at 69.28%. Regardless of EFC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.40% trails the industry average.
- EFC, with its decline in revenue, underperformed when compared the industry average of 2.5%. Since the same quarter one year prior, revenues fell by 16.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The share price of ELLINGTON FINANCIAL LLC has not done very well: it is down 14.81% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
- 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, ELLINGTON FINANCIAL LLC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Ellington Financial Ratings Report.
- The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.11 is very weak and demonstrates a lack of ability to pay short-term obligations.
- SSI, with its decline in revenue, underperformed when compared the industry average of 10.7%. Since the same quarter one year prior, revenues slightly dropped by 4.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- STAGE STORES INC's earnings per share declined by 47.8% in the most recent quarter compared to 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, STAGE STORES INC reported lower earnings of $0.17 versus $1.17 in the prior year. This year, the market expects an improvement in earnings ($0.46 versus $0.17).
- The gross profit margin for STAGE STORES INC is currently lower than what is desirable, coming in at 31.88%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.17% trails that of the industry average.
- Net operating cash flow has decreased to $71.13 million or 33.26% 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.
- You can view the full Stage Stores Ratings Report.
- 36.14% is the gross profit margin for MANNING & NAPIER INC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.94% trails the industry average.
- MN, with its decline in revenue, underperformed when compared the industry average of 1.8%. Since the same quarter one year prior, revenues fell by 26.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- MANNING & NAPIER 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, MANNING & NAPIER INC increased its bottom line by earning $0.87 versus $0.67 in the prior year. For the next year, the market is expecting a contraction of 21.8% in earnings ($0.68 versus $0.87).
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 37.98%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 67.24% 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.
- 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 64.7% when compared to the same quarter one year ago, falling from $8.11 million to $2.86 million.
- You can view the full Manning & Napier Ratings Report.
- Our dividend calendar.