What To Hold: 3 Hold-Rated Dividend Stocks SPH, SSW, GAIN - TheStreet

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."

Suburban Propane Partners

Dividend Yield: 11.90%

Suburban Propane Partners

(NYSE:

SPH

) shares currently have a dividend yield of 11.90%.

Suburban Propane Partners, L.P., through its subsidiaries, engages in the retail marketing and distribution of propane, fuel oil, and refined fuels. The company has a P/E ratio of 21.67.

The average volume for Suburban Propane Partners has been 219,400 shares per day over the past 30 days. Suburban Propane Partners has a market cap of $1.8 billion and is part of the utilities industry. Shares are down 31% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Suburban Propane Partners

as a

hold

. The company's strongest point has been its expanding profit margins. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • SPH, with its decline in revenue, underperformed when compared the industry average of 9.1%. Since the same quarter one year prior, revenues fell by 27.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Gas Utilities industry average, but is less than that of the S&P 500. The net income has decreased by 22.7% when compared to the same quarter one year ago, dropping from -$54.72 million to -$67.14 million.
  • SUBURBAN PROPANE PRTNRS -LP's earnings per share declined by 23.3% in the most recent quarter compared to 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, SUBURBAN PROPANE PRTNRS -LP reported lower earnings of $1.38 versus $1.55 in the prior year. This year, the market expects an improvement in earnings ($1.96 versus $1.38).
  • Looking at the price performance of SPH's shares over the past 12 months, there is not much good news to report: the stock is down 33.86%, 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. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, SPH is still more expensive than most of the other companies in its industry.
  • The gross profit margin for SUBURBAN PROPANE PRTNRS -LP is currently extremely low, coming in at 0.14%. It has decreased from the same quarter the previous year.

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Seaspan

Dividend Yield: 9.80%

Seaspan

(NYSE:

SSW

) shares currently have a dividend yield of 9.80%.

Seaspan Corporation operates as an independent charter owner and manager of containerships in Hong Kong. The company charters its containerships pursuant to long-term, fixed-rate time charters to various container liner companies. The company has a P/E ratio of 3.81.

The average volume for Seaspan has been 220,600 shares per day over the past 30 days. Seaspan has a market cap of $1.5 billion and is part of the transportation industry. Shares are down 15.3% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Seaspan

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 16.0%. Since the same quarter one year prior, revenues rose by 14.5%. 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.
  • The gross profit margin for SEASPAN CORP is currently very high, coming in at 70.44%. Regardless of SSW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.62% trails the industry average.
  • SEASPAN 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. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SEASPAN CORP reported lower earnings of $0.78 versus $2.94 in the prior year. This year, the market expects an improvement in earnings ($1.07 versus $0.78).
  • Net operating cash flow has declined marginally to $82.87 million or 4.19% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The share price of SEASPAN CORP has not done very well: it is down 24.86% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

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Gladstone Investment

Dividend Yield: 9.70%

Gladstone Investment

(NASDAQ:

GAIN

) shares currently have a dividend yield of 9.70%.

Gladstone Investment Corporation is a business development company specializing in buyouts; recapitalizations; refinancing existing debt; senior debt securities; junior subordinated debt securities; limited liability company interests, and warrants or options. The company has a P/E ratio of 55.43.

The average volume for Gladstone Investment has been 126,400 shares per day over the past 30 days. Gladstone Investment has a market cap of $234.9 million and is part of the financial services industry. Shares are up 10.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Gladstone Investment

as a

hold

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and expanding profit margins. 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:

  • GAIN's very impressive revenue growth greatly exceeded the industry average of 5.6%. Since the same quarter one year prior, revenues leaped by 51.5%. 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.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Capital Markets industry and the overall market, GLADSTONE INVESTMENT CORP/DE's return on equity exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 56.57% to -$8.46 million when compared to the same quarter last year. Despite an increase in cash flow of 56.57%, GLADSTONE INVESTMENT CORP/DE is still growing at a significantly lower rate than the industry average of 271.57%.
  • GLADSTONE INVESTMENT CORP/DE 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 INVESTMENT CORP/DE turned its bottom line around by earning $1.88 versus -$0.06 in the prior year. For the next year, the market is expecting a contraction of 60.4% in earnings ($0.75 versus $1.88).
  • 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 104.1% when compared to the same quarter one year ago, falling from $2.70 million to -$0.11 million.

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