What To Hold: 3 Hold-Rated Dividend Stocks KNOP, CYD, MFIN

These 3 dividend stocks are rated a Hold by TheStreet
By TheStreet Wire ,

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."

KNOT Offshore Partners

Dividend Yield: 11.10%

KNOT Offshore Partners

(NYSE:

KNOP

) shares currently have a dividend yield of 11.10%.

KNOT Offshore Partners LP owns and operates shuttle tankers under long-term charters in the North Sea and Brazil. The company provides crude oil loading, transportation, and storage services under time charters and bareboat charters. As of March 18, 2016, it had a fleet of 10 shuttle tankers. The company has a P/E ratio of 12.50.

The average volume for KNOT Offshore Partners has been 56,100 shares per day over the past 30 days. KNOT Offshore Partners has a market cap of $509.9 million and is part of the transportation industry. Shares are up 40.2% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

KNOT Offshore Partners

as a

hold

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 23.9%. Since the same quarter one year prior, revenues rose by 15.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • KNOT OFFSHORE PRTNRS LP has improved earnings per share by 21.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, KNOT OFFSHORE PRTNRS LP increased its bottom line by earning $1.57 versus $1.34 in the prior year. This year, the market expects an improvement in earnings ($1.75 versus $1.57).
  • 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, KNOT OFFSHORE PRTNRS LP's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • In its most recent trading session, KNOP 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.
  • The debt-to-equity ratio of 1.28 is relatively high when compared with the industry average, suggesting a need for better debt level management.

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China Yuchai International

Dividend Yield: 7.70%

China Yuchai International

(NYSE:

CYD

) shares currently have a dividend yield of 7.70%.

China Yuchai International Limited, through its subsidiaries, manufactures and sells diesel and natural gas engines in the People's Republic of China (PRC) and internationally. It operates in two segments, Yuchai and HLGE. The company has a P/E ratio of 8.07.

The average volume for China Yuchai International has been 42,700 shares per day over the past 30 days. China Yuchai International has a market cap of $431.1 million and is part of the industrial industry. Shares are up 3.6% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

China Yuchai International

as a

hold

. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:

  • The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 13.0%. Since the same quarter one year prior, revenues fell by 11.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The gross profit margin for CHINA YUCHAI INTERNATIONAL is rather low; currently it is at 17.88%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.63% trails that of the industry average.
  • 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. In comparison to the other companies in the Machinery industry and the overall market, CHINA YUCHAI INTERNATIONAL's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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Medallion Financial

Dividend Yield: 12.30%

Medallion Financial

(NASDAQ:

MFIN

) shares currently have a dividend yield of 12.30%.

Medallion Financial Corp., through with its subsidiaries, operates as a specialty finance company in the United States. It originates, acquires, and services loans that finance taxicab medallions and various types of commercial businesses. The company has a P/E ratio of 6.77.

The average volume for Medallion Financial has been 123,900 shares per day over the past 30 days. Medallion Financial has a market cap of $197.7 million and is part of the financial services industry. Shares are up 15.1% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Medallion Financial

as a

hold

. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and disappointing return on equity.

Highlights from the ratings report include:

  • 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 24.3%. 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 23.3% in earnings ($0.92 versus $1.20).
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, MFIN has underperformed the S&P 500 Index, declining 13.76% 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 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.

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