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."

KKR Financial Holdings

Dividend Yield: 7.50%

KKR Financial Holdings (NYSE: KFN) shares currently have a dividend yield of 7.50%.

KKR Financial Holdings LLC, together with its subsidiaries, operates as a specialty finance company with expertise in a range of asset classes. The company has a P/E ratio of 5.96. Currently there are 3 analysts that rate KKR Financial Holdings a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for KKR Financial Holdings has been 1,213,600 shares per day over the past 30 days. KKR Financial Holdings has a market cap of $2.3 billion and is part of the real estate industry. Shares are up 5.6% year to date as of the close of trading on Friday.

TheStreet Ratings rates KKR Financial Holdings as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • KFN's revenue growth has slightly outpaced the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 11.0%. 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 KKR FINANCIAL HOLDINGS LLC is currently very high, coming in at 77.00%. Regardless of KFN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, KFN's net profit margin of 45.15% significantly outperformed against the industry.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. 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.
  • Net operating cash flow has decreased to $48.92 million or 19.30% when compared to the same quarter last year. Despite a decrease in cash flow of 19.30%, KKR FINANCIAL HOLDINGS LLC is still significantly exceeding the industry average of -111.92%.
  • The debt-to-equity ratio is very high at 3.45 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.

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.

Redwood

Dividend Yield: 5.00%

Redwood (NYSE: RWT) shares currently have a dividend yield of 5.00%.

Redwood Trust, Inc. engages in investing, financing, and managing real estate-related assets. The company has a P/E ratio of 14.16. Currently there are 4 analysts that rate Redwood a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for Redwood has been 971,800 shares per day over the past 30 days. Redwood has a market cap of $1.8 billion and is part of the real estate industry. Shares are up 30.2% year to date as of the close of trading on Friday.

TheStreet Ratings rates Redwood as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.

Highlights from the ratings report include:
  • Powered by its strong earnings growth of 1766.66% and other important driving factors, this stock has surged by 95.11% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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.
  • REDWOOD TRUST INC 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, REDWOOD TRUST INC increased its bottom line by earning $1.59 versus $0.31 in the prior year. This year, the market expects an improvement in earnings ($1.68 versus $1.59).
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, REDWOOD TRUST INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • RWT, with its decline in revenue, underperformed when compared the industry average of 16.4%. Since the same quarter one year prior, revenues slightly dropped by 5.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Net operating cash flow has significantly decreased to -$108.05 million or 4761.34% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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.

PG&E

Dividend Yield: 4.10%

PG&E (NYSE: PCG) shares currently have a dividend yield of 4.10%.

PG&E Corporation, through its subsidiaries, operates as a public utility company in northern and central California. The company has a P/E ratio of 22.85. Currently there are 3 analysts that rate PG&E a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for PG&E has been 2,704,100 shares per day over the past 30 days. PG&E has a market cap of $18.9 billion and is part of the utilities industry. Shares are up 8.7% year to date as of the close of trading on Friday.

TheStreet Ratings rates PG&E as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, poor profit margins and generally higher debt management risk.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 0.4%. 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, 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 Multi-Utilities industry. The net income has significantly decreased by 110.3% when compared to the same quarter one year ago, falling from $87.00 million to -$9.00 million.
  • The gross profit margin for PG&E CORP is currently lower than what is desirable, coming in at 26.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -0.23% trails that of the industry average.

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.

Mack-Cali Realty

Dividend Yield: 6.30%

Mack-Cali Realty (NYSE: CLI) shares currently have a dividend yield of 6.30%.

Mack-Cali Realty Corporation is a real estate investment trust (REIT). It engages in the leasing, management, acquisition, development, and construction of commercial real estate properties in the United States. The company has a P/E ratio of 60.51. Currently there are 3 analysts that rate Mack-Cali Realty a buy, 2 analysts rate it a sell, and 3 rate it a hold.

The average volume for Mack-Cali Realty has been 770,300 shares per day over the past 30 days. Mack-Cali Realty has a market cap of $2.5 billion and is part of the real estate industry. Shares are up 9.2% year to date as of the close of trading on Friday.

TheStreet Ratings rates Mack-Cali Realty as a hold. Among the primary strengths of the company is its reasonable valuation levels, considering its current price compared to earnings, book value and other measures. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • Along with the stagnant revenue growth, the company underperformed against the industry average of 16.4%. Since the same quarter one year prior, revenues have remained constant. Even though the company's revenue remained stagnant, the earnings per share decreased.
  • MACK-CALI REALTY CORP has exprienced 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 two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, MACK-CALI REALTY CORP reported lower earnings of $0.46 versus $0.77 in the prior year. This year, the market expects an improvement in earnings ($0.50 versus $0.46).
  • 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 157.0% when compared to the same quarter one year ago, falling from $16.19 million to -$9.23 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, MACK-CALI REALTY CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.

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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