4 Hold-Rated Dividend Stocks

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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 and 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 4 stocks with substantial yields, that ultimately, we have rated "Hold."

MFA Financial

Dividend Yield: 8.70%

MFA Financial (NYSE: MFA) shares currently have a dividend yield of 8.70%.

MFA Financial, Inc., a real estate investment trust (REIT), invests in residential agency and non-agency mortgage-backed securities (MBS). The company has a P/E ratio of 11.07. Currently there are 7 analysts that rate MFA Financial a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for MFA Financial has been 3,453,000 shares per day over the past 30 days. MFA Financial has a market cap of $3.3 billion and is part of the real estate industry. Shares are up 12.6% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates MFA Financial as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, feeble growth in the company's earnings per share and deteriorating net income.

Highlights from the ratings report include:
  • Compared to its closing price of one year ago, MFA's share price has jumped by 25.96%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • MFA's revenue growth trails the industry average of 16.4%. Since the same quarter one year prior, revenues slightly increased by 2.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • The gross profit margin for MFA FINANCIAL INC is currently very high, coming in at 87.70%. Regardless of MFA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MFA's net profit margin of 54.61% significantly outperformed against the industry.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Real Estate Investment Trusts (REITs) industry average. The net income has decreased by 1.9% when compared to the same quarter one year ago, dropping from $70.56 million to $69.22 million.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, MFA FINANCIAL INC's return on equity is below that of both the industry average and the S&P 500.

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ARMOUR Residential REIT

Dividend Yield: 13.20%

ARMOUR Residential REIT (NYSE: ARR) shares currently have a dividend yield of 13.20%.

ARMOUR Residential REIT, Inc. is a real estate investment trust launched and managed by ARMOUR Residential Management LLC. It invests in the real estate markets of the United States. The company has a P/E ratio of 6.47. Currently there are 2 analysts that rate ARMOUR Residential REIT a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for ARMOUR Residential REIT has been 9,213,500 shares per day over the past 30 days. ARMOUR Residential REIT has a market cap of $2.0 billion and is part of the real estate industry. Shares are down 3.6% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates ARMOUR Residential REIT as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and attractive valuation levels. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • ARR's very impressive revenue growth greatly exceeded the industry average of 16.4%. Since the same quarter one year prior, revenues leaped by 215.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ARMOUR RESIDENTIAL REIT INC has improved earnings per share by 37.0% 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 year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ARMOUR RESIDENTIAL REIT INC increased its bottom line by earning $0.97 versus $0.02 in the prior year. For the next year, the market is expecting a contraction of 5.2% in earnings ($0.92 versus $0.97).
  • 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ARMOUR RESIDENTIAL REIT INC's return on equity is below that of both the industry average and the S&P 500.
  • ARR has underperformed the S&P 500 Index, declining 5.86% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

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Frontier Communications Corp Class B

Dividend Yield: 9.90%

Frontier Communications Corp Class B (NASDAQ: FTR) shares currently have a dividend yield of 9.90%.

Frontier Communications Corporation, a communications company, provides regulated and unregulated voice, data, and video services to business, residential, and wholesale customers in the United States. The company has a P/E ratio of 31.23. Currently there are 5 analysts that rate Frontier Communications Corp Class B a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for Frontier Communications Corp Class B has been 10,327,600 shares per day over the past 30 days. Frontier Communications Corp Class B has a market cap of $4.1 billion and is part of the telecommunications industry. Shares are down 7.2% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates Frontier Communications Corp Class B as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has increased to $392.19 million or 30.71% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 14.22%.
  • 44.90% is the gross profit margin for FRONTIER COMMUNICATIONS CORP which we consider to be strong. Regardless of FTR's high profit margin, it has managed to decrease from the same period last year.
  • 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 Diversified Telecommunication Services industry and the overall market, FRONTIER COMMUNICATIONS CORP's return on equity is below that of both the industry average and the S&P 500.
  • 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 Diversified Telecommunication Services industry. The net income has significantly decreased by 41.1% when compared to the same quarter one year ago, falling from $42.25 million to $24.88 million.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

Banco Santander

Dividend Yield: 8.60%

Banco Santander (NYSE: SAN) shares currently have a dividend yield of 8.60%.

Banco Santander-Chile provides commercial and retail banking services to corporate and individual customers in Chile. Currently there are no analysts that rate Banco Santander a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Banco Santander has been 4,404,000 shares per day over the past 30 days. Banco Santander has a market cap of $75.6 billion and is part of the banking industry. Shares are down 10.8% year to date as of the close of trading on Wednesday.

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

Highlights from the ratings report include:
  • SAN's revenue growth has slightly outpaced the industry average of 1.1%. Since the same quarter one year prior, revenues slightly increased by 4.9%. 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.
  • 46.60% is the gross profit margin for BANCO SANTANDER-CHILE which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, SAN's net profit margin of 16.80% compares favorably to 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 Commercial Banks industry and the overall market, BANCO SANTANDER-CHILE's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • The share price of BANCO SANTANDER-CHILE has not done very well: it is down 6.64% 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, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

Other helpful dividend tools from TheStreet:

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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