3 Hold-Rated Dividend Stocks: SLRC, GLAD, DSWL - TheStreet

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."

Solar Capital

Dividend Yield: 8.70%

Solar Capital

(NASDAQ:

SLRC

) shares currently have a dividend yield of 8.70%.

Solar Capital Ltd. is a business development company specializing in investments in leveraged middle market companies. The company has a P/E ratio of 11.54.

The average volume for Solar Capital has been 212,200 shares per day over the past 30 days. Solar Capital has a market cap of $783.9 million and is part of the financial services industry. Shares are down 17.2% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Solar Capital

as a

hold

. The company's strengths can be seen in multiple areas, such as its increase in net income, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 131515.4% when compared to the same quarter one year prior, rising from -$0.01 million to $17.08 million.
  • The gross profit margin for SOLAR CAPITAL LTD is currently very high, coming in at 70.54%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 61.00% significantly outperformed against the industry average.
  • The revenue fell significantly faster than the industry average of 6.9%. Since the same quarter one year prior, revenues fell by 28.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • SOLAR CAPITAL LTD has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. 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, SOLAR CAPITAL LTD reported lower earnings of $1.70 versus $3.12 in the prior year. For the next year, the market is expecting a contraction of 8.2% in earnings ($1.56 versus $1.70).
  • 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, SOLAR CAPITAL LTD's return on equity is below that of both the industry average and the S&P 500.

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Gladstone Capital

Dividend Yield: 9.00%

Gladstone Capital

(NASDAQ:

GLAD

) shares currently have a dividend yield of 9.00%.

Gladstone Capital Corporation is a business development company specializing in investments in debt and equity securities. The company has a P/E ratio of 11.64.

The average volume for Gladstone Capital has been 140,200 shares per day over the past 30 days. Gladstone Capital has a market cap of $195.5 million and is part of the financial services industry. Shares are down 4.2% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Gladstone Capital

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 6.9%. Since the same quarter one year prior, revenues rose by 19.1%. 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.
  • Net operating cash flow has increased to $11.11 million or 10.62% when compared to the same quarter last year. In addition, GLADSTONE CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -127.80%.
  • 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. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, GLADSTONE CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • GLADSTONE CAPITAL 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. 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, GLADSTONE CAPITAL CORP turned its bottom line around by earning $1.53 versus -$0.38 in the prior year. For the next year, the market is expecting a contraction of 43.1% in earnings ($0.87 versus $1.53).
  • 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 879.8% when compared to the same quarter one year ago, falling from -$2.06 million to -$20.18 million.

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Deswell Industries

Dividend Yield: 9.60%

Deswell Industries

(NASDAQ:

DSWL

) shares currently have a dividend yield of 9.60%.

Deswell Industries, Inc. manufactures and sells injection-molded plastic parts and components, electronic products, assembling, and metallic parts for original equipment manufacturers and contract manufacturers.

The average volume for Deswell Industries has been 23,000 shares per day over the past 30 days. Deswell Industries has a market cap of $33.6 million and is part of the consumer non-durables industry. Shares are down 7.6% year-to-date as of the close of trading on Wednesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates

Deswell Industries

as a

hold

. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and poor profit margins.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electronic Equipment, Instruments & Components industry. The net income increased by 100.8% when compared to the same quarter one year prior, rising from -$1.72 million to $0.01 million.
  • DSWL 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 4.23, which clearly demonstrates the ability to cover short-term cash needs.
  • DSWL, with its decline in revenue, underperformed when compared the industry average of 3.5%. Since the same quarter one year prior, revenues fell by 19.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • DSWL has underperformed the S&P 500 Index, declining 14.80% 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.
  • 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 Electronic Equipment, Instruments & Components industry and the overall market, DESWELL INDUSTRIES INC's return on equity significantly trails that of both the industry average and the S&P 500.

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