NovaStar Financial (NYSE:NFI) has managed to attract the sort of attention that you rarely see with a real estate investment trust, better known as a REIT. Whether it's an unflattering Wall Street Journal article over a year ago or a series of interesting articles from columnist Herb Greenberg questioning the company, NovaStar isn't overlooked or ignored by any stretch of the imagination.

Of course, as befits any stock that isn't soaring to the moon on a daily basis, there is also incessant bellyaching about naked shorting and other market malfeasance from retail investors.

For the first quarter, at least, business still seems to be on track. Reported net income climbed 13% as net interest income increased 30% over the prior year. Gains on mortgage sales (a major area of controversy) were down significantly, though mortgage securitizations climbed 24% annually -- and declined a bit sequentially.

There has been a lot of squawking about the quality of earnings at NovaStar, with some analysts recently stating that it has declined precipitously. Part of the problem is that management assumptions feed directly into the calculation of earnings; if management decides to stretch certain assumptions, earnings can be made to look better.

That's a very powerful temptation for any management team, and perhaps it's part of the suspicion that swirls around the company. So long as those assumptions hold up, there's no problem. But if a company's assumptions become too aggressive (or Wall Street believes they are too aggressive), then trouble can ensue, as it has for Puerto Rico-based mortgage lender Doral Financial (NYSE:DRL).

Frankly, I'm not especially interested in getting in the middle of the "he said, she said" squabbling over whether or not NovaStar is representing its true financial condition accurately. I certainly acknowledge the arguments made by those who claim that earnings quality is on the downslope. However, I would also note that the accounting involved is so complex that it's tough for any third party to sort it out.

Investors need to remember that this is a pretty risky business. Subprime lending has always been dicey. Investors need only look at past blowups in the markets for manufactured housing loans and subprime auto loans to see some of the dangers.

Yes, yes, I know "it's different this time." But is it really? What happens if the market for the kinds of mortgage-backed securities that NovaStar sells simply tanks? What if the economy reverses and delinquencies tick up? And what about the ongoing compression in the interest-rate curve?

What's more, there's an ongoing possibility that the IRS is going to change the rules of the game. Changes to the tax code would alter the calculation of earnings and dividends -- possibly leading to a lower payout for investors. Any way you slice it, then, NovaStar yields over 14%, at least in part because of the risks involved.

But risky doesn't mean bad. Risk is only really a problem when it's hidden (and a company is actually more at risk than it appears) or when investors are not adequately compensated for the risk (which is a decision for each investor to make). Risk-taking is part and parcel of investing, and as long as people don't delude themselves, there's nothing wrong with a "risky" stock.

That said, NovaStar isn't my cup of tea. I have no ego issues with admitting that I really don't understand all the intricacies of the company's accounting. As a result, I can't value the stock and assess for myself whether it's a good buy for me or not.

And that's really the name of the game. If you can dig into NovaStar's financials and assure yourself that everything's copacetic, that's great. But if you're buying or holding the stock simply because the dividend yield is so high, you're playing chicken with a train and, sooner or later, the policy of investing in the dividend (and ignoring the company) will come back to squash you.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).