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: 11.20% MFA Financial (NYSE: MFA) shares currently have a dividend yield of 11.20%. 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 8.82. The average volume for MFA Financial has been 1,877,700 shares per day over the past 30 days. MFA Financial has a market cap of $2.6 billion and is part of the real estate industry. Shares are up 9.1% 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 expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- MFA's revenue growth trails the industry average of 11.9%. Since the same quarter one year prior, revenues slightly increased by 0.5%. 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 MFA FINANCIAL INC is currently very high, coming in at 89.61%. 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 56.12% significantly outperformed against the industry.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income has decreased by 5.0% when compared to the same quarter one year ago, dropping from $82.17 million to $78.07 million.
- Net operating cash flow has decreased to $39.00 million or 24.75% 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 MFA Financial Ratings Report.
- FTR, with its decline in revenue, underperformed when compared the industry average of 18.6%. Since the same quarter one year prior, revenues slightly dropped by 1.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 37.79% 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 -13.72% significantly underperformed when compared to the industry average.
- FRONTIER COMMUNICATIONS CORP 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, FRONTIER COMMUNICATIONS CORP swung to a loss, reporting -$0.29 versus $0.13 in the prior year. This year, the market expects an improvement in earnings (-$0.06 versus -$0.29).
- 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 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 264.7% when compared to the same quarter one year ago, falling from -$51.00 million to -$186.00 million.
- You can view the full Frontier Communications Ratings Report.
- STX, with its decline in revenue, slightly underperformed the industry average of 12.7%. Since the same quarter one year prior, revenues fell by 22.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- SEAGATE TECHNOLOGY PLC 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, SEAGATE TECHNOLOGY PLC increased its bottom line by earning $5.22 versus $4.52 in the prior year. For the next year, the market is expecting a contraction of 67.3% in earnings ($1.71 versus $5.22).
- The debt-to-equity ratio is very high at 2.45 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, STX's quick ratio is somewhat strong at 1.09, demonstrating the ability to handle short-term liquidity needs.
- 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 Computers & Peripherals industry. The net income has significantly decreased by 106.9% when compared to the same quarter one year ago, falling from $291.00 million to -$20.00 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 62.80%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 107.95% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- You can view the full Seagate Technology Ratings Report.
- Our dividend calendar.