3 Hold-Rated Dividend Stocks: ATLS, AINV, RWT
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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."Atlas Energy (NYSE:ATLS) shares currently have a dividend yield of 4.40%. Atlas Energy, L.P. engages in the development and production of natural gas, crude oil, and natural gas liquids in basins across the United States. It also sponsors and manages tax-advantaged natural gas and oil investment partnerships.The average volume for Atlas Energy has been 447,800 shares per day over the past 30 days. Atlas Energy has a market cap of $2.2 billion and is part of the energy industry. Shares are down 10.1% year-to-date as of the close of trading on Wednesday.TheStreet Ratings rates Atlas Energy as a hold. Among the primary strengths of the company is its robust revenue growth -- not just in the most recent periods but in previous quarters as well. At the same time, however, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.Highlights from the ratings report include:
- ATLS's very impressive revenue growth greatly exceeded the industry average of 7.8%. Since the same quarter one year prior, revenues leaped by 78.1%. 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.
- ATLAS ENERGY LP 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, ATLAS ENERGY LP reported poor results of -$1.48 versus -$1.02 in the prior year. This year, the market expects an improvement in earnings ($2.04 versus -$1.48).
- In its most recent trading session, ATLS has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, ATLAS ENERGY LP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for ATLAS ENERGY LP is currently extremely low, coming in at 11.81%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.45% trails that of the industry average.
- You can view the full Atlas Energy Ratings Report.
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