What To Hold: 3 Hold-Rated Dividend Stocks TCPC, MRCC, FGP - 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."

TCP Capital

Dividend Yield: 9.60%

TCP Capital

(NASDAQ:

TCPC

) shares currently have a dividend yield of 9.60%.

TCP Capital Corp. is a business development company specializing in direct equity and debt investments in middle-market, senior secured loans, junior loans, originated loans, mezzanine, senior debt instruments, bonds, and secondary-market investments. It seeks to invest in the United States. The company has a P/E ratio of 9.67.

The average volume for TCP Capital has been 166,200 shares per day over the past 30 days. TCP Capital has a market cap of $732.6 million and is part of the financial services industry. Shares are down 9.7% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

TCP Capital

as a

hold

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

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 30.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 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 48.2% when compared to the same quarter one year prior, rising from $11.83 million to $17.53 million.
  • Net operating cash flow has significantly increased by 76.23% to -$38.35 million when compared to the same quarter last year. Despite an increase in cash flow of 76.23%, TCP CAPITAL CORP is still growing at a significantly lower rate than the industry average of 272.40%.
  • TCPC has underperformed the S&P 500 Index, declining 12.19% 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. When compared to other companies in the Capital Markets industry and the overall market, TCP CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.

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Monroe Capital

Dividend Yield: 9.50%

Monroe Capital

(NASDAQ:

MRCC

) shares currently have a dividend yield of 9.50%.

Monroe Capital Corporation is a business development company specializing in senior, unitranche and junior secured debt and, to a lesser extent, unsecured debt and equity investments in middle-market companies. The fund focuses on companies with a maximum of $25 million in EBITDA per year. The company has a P/E ratio of 11.96.

The average volume for Monroe Capital has been 62,000 shares per day over the past 30 days. Monroe Capital has a market cap of $189.2 million and is part of the real estate industry. Shares are up 1.7% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Monroe Capital

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 find that the company's return on equity has been disappointing.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 35.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • MONROE CAPITAL CORP reported significant earnings per share improvement 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, MONROE CAPITAL CORP increased its bottom line by earning $1.45 versus $1.38 in the prior year. This year, the market expects an improvement in earnings ($1.63 versus $1.45).
  • Net operating cash flow has increased to -$5.81 million or 34.79% when compared to the same quarter last year. Despite an increase in cash flow of 34.79%, MONROE CAPITAL CORP is still growing at a significantly lower rate than the industry average of 272.40%.
  • After a year of stock price fluctuations, the net result is that MRCC's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • 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 Capital Markets industry and the overall market, MONROE CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.

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Ferrellgas Partners

Dividend Yield: 10.30%

Ferrellgas Partners

(NYSE:

FGP

) shares currently have a dividend yield of 10.30%.

Ferrellgas Partners, L.P. distributes and sells propane and related equipment and supplies primarily in the United States. The company transports propane to propane distribution locations, tanks on customers' premises, or to portable propane tanks delivered to retailers. The company has a P/E ratio of 56.69.

The average volume for Ferrellgas Partners has been 259,200 shares per day over the past 30 days. Ferrellgas Partners has a market cap of $2.0 billion and is part of the energy industry. Shares are down 9.6% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Ferrellgas Partners

as a

hold

. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and weak operating cash flow.

Highlights from the ratings report include:

  • Compared to other companies in the Gas Utilities industry and the overall market, FERRELLGAS PARTNERS -LP's return on equity exceeds that of both the industry average and the S&P 500.
  • Despite the weak revenue results, FGP has outperformed against the industry average of 27.4%. Since the same quarter one year prior, revenues slightly dropped by 4.1%. The declining revenue appears to have seeped down to the company's 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 23.0% when compared to the same quarter one year ago, dropping from -$47.80 million to -$58.78 million.
  • Looking at the price performance of FGP's shares over the past 12 months, there is not much good news to report: the stock is down 28.19%, 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, FGP is still more expensive than most of the other companies in its industry.
  • The debt-to-equity ratio is very high at 9.59 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.50, which clearly demonstrates the inability to cover short-term cash needs.

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