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."ZAIS Financial Dividend Yield: 11.30% ZAIS Financial (NYSE: ZFC) shares currently have a dividend yield of 11.30%. ZAIS Financial Corp. invests in residential mortgage loans in the United States. The company operates in two segments, Residential Mortgage Investments and Residential Mortgage Banking. The average volume for ZAIS Financial has been 44,600 shares per day over the past 30 days. ZAIS Financial has a market cap of $113.0 million and is part of the real estate industry. Shares are down 5.7% year-to-date as of the close of trading on Friday. 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 ZAIS Financial as a hold. Among the primary strengths of the company is its generally strong cash flow from operations. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- Net operating cash flow has significantly increased by 101.90% to $0.57 million when compared to the same quarter last year. In addition, ZAIS FINANCIAL CORP has also vastly surpassed the industry average cash flow growth rate of 11.94%.
- The revenue fell significantly faster than the industry average of 11.9%. Since the same quarter one year prior, revenues fell by 24.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- ZAIS FINANCIAL 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, ZAIS FINANCIAL CORP swung to a loss, reporting -$0.27 versus $2.91 in the prior year. This year, the market expects an improvement in earnings ($1.83 versus -$0.27).
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, ZAIS FINANCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for ZAIS FINANCIAL CORP is currently extremely low, coming in at 1.32%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -21.14% is significantly below that of the industry average.
- You can view the full ZAIS Financial Ratings Report.
- WPT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.14, which clearly demonstrates the ability to cover short-term cash needs.
- 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, WORLD POINT TERMINALS's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- Despite the weak revenue results, WPT has outperformed against the industry average of 24.5%. Since the same quarter one year prior, revenues slightly dropped by 2.3%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
- WPT has underperformed the S&P 500 Index, declining 13.00% from its price level of one year ago. 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.
- Net operating cash flow has decreased to $11.58 million or 10.04% when compared to the same quarter last year. Despite a decrease in cash flow WORLD POINT TERMINALS is still fairing well by exceeding its industry average cash flow growth rate of -48.72%.
- You can view the full World Point Terminals Ratings Report.
- The gross profit margin for MEDALLION FINANCIAL CORP is rather high; currently it is at 50.95%. Regardless of MFIN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MFIN's net profit margin of 75.86% significantly outperformed against the industry.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 24.5%. Since the same quarter one year prior, revenues fell by 24.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- MEDALLION FINANCIAL CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, MEDALLION FINANCIAL CORP increased its bottom line by earning $1.20 versus $1.14 in the prior year. For the next year, the market is expecting a contraction of 3.3% in earnings ($1.16 versus $1.20).
- Net operating cash flow has significantly decreased to -$14.29 million or 1927.74% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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, MEDALLION FINANCIAL CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Medallion Financial Ratings Report.
- Our dividend calendar.