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."Arlington Asset Investment Dividend Yield: 19.40% Arlington Asset Investment (NYSE: AI) shares currently have a dividend yield of 19.40%. Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The company has a P/E ratio of 3.71. The average volume for Arlington Asset Investment has been 256,300 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $296.4 million and is part of the real estate industry. Shares are down 0.8% year-to-date as of the close of trading on Monday. 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 Arlington Asset Investment as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 23.7%. Since the same quarter one year prior, revenues slightly increased by 5.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The gross profit margin for ARLINGTON ASSET INVESTMENT is currently very high, coming in at 118.63%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 149.59% significantly outperformed against the industry average.
- ARLINGTON ASSET INVESTMENT has improved earnings per share by 25.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ARLINGTON ASSET INVESTMENT swung to a loss, reporting -$3.02 versus $0.61 in the prior year. This year, the market expects an improvement in earnings ($2.84 versus -$3.02).
- Net operating cash flow has declined marginally to $21.22 million or 4.26% when compared to the same quarter last year. Despite a decrease in cash flow of 4.26%, ARLINGTON ASSET INVESTMENT is still significantly exceeding the industry average of -199.57%.
- 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 Capital Markets industry and the overall market, ARLINGTON ASSET INVESTMENT's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Arlington Asset Investment Ratings Report.
- Net operating cash flow has increased to -$13.21 million or 23.80% when compared to the same quarter last year. In addition, CALAMOS ASSET MANAGEMENT INC has also vastly surpassed the industry average cash flow growth rate of -199.57%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 23.7%. Since the same quarter one year prior, revenues fell by 15.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 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. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, CALAMOS ASSET MANAGEMENT INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- CALAMOS ASSET MANAGEMENT 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. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, CALAMOS ASSET MANAGEMENT INC reported lower earnings of $0.19 versus $0.71 in the prior year. For the next year, the market is expecting a contraction of 7.9% in earnings ($0.18 versus $0.19).
- 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 1408.9% when compared to the same quarter one year ago, falling from $0.10 million to -$1.32 million.
- You can view the full Calamos Asset Management 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 10.3% when compared to the same quarter one year prior, going from $14.00 million to $15.45 million.
- Net operating cash flow has significantly increased by 67.25% to $26.37 million when compared to the same quarter last year. In addition, DELEK LOGISTICS PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -49.80%.
- DKL, with its decline in revenue, slightly underperformed the industry average of 24.0%. Since the same quarter one year prior, revenues fell by 27.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Looking at the price performance of DKL's shares over the past 12 months, there is not much good news to report: the stock is down 41.99%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier 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.
- DELEK LOGISTICS PARTNERS LP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, DELEK LOGISTICS PARTNERS LP reported lower earnings of $2.57 versus $2.87 in the prior year. For the next year, the market is expecting a contraction of 12.4% in earnings ($2.25 versus $2.57).
- You can view the full Delek Logistics Partners Ratings Report.
- Our dividend calendar.