3 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 3 stocks with substantial yields, that ultimately, we have rated "Hold."

LRR Energy

Dividend Yield: 11.20%

LRR Energy (NYSE: LRE) shares currently have a dividend yield of 11.20%.

LRR Energy, L.P., through its subsidiary, LRE Operating, LLC, engages in the acquisition, exploitation, development, and operation of oil and natural gas properties in North America. The company has a P/E ratio of 31.72. Currently there are 4 analysts that rate LRR Energy a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for LRR Energy has been 155,500 shares per day over the past 30 days. LRR Energy has a market cap of $269.0 million and is part of the energy industry. Shares are down 0.5% year to date as of the close of trading on Monday.

TheStreet Ratings rates LRR Energy as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • LRE's revenue growth has slightly outpaced the industry average of 2.9%. 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 gross profit margin for LRR ENERGY LP is currently very high, coming in at 73.30%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.86% trails the industry average.
  • Net operating cash flow has increased to $17.63 million or 10.00% when compared to the same quarter last year. Despite an increase in cash flow, LRR ENERGY LP's cash flow growth rate is still lower than the industry average growth rate of 29.14%.
  • LRR ENERGY LP 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, LRR ENERGY LP reported lower earnings of $0.00 versus $2.42 in the prior year. This year, the market expects an increase in earnings to $0.48 from $0.00.
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 110.7% when compared to the same quarter one year ago, falling from $4.67 million to -$0.50 million.

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Horizon Technology Finance Corp BDC

Dividend Yield: 9.40%

Horizon Technology Finance Corp BDC (NASDAQ: HRZN) shares currently have a dividend yield of 9.40%.

Horizon Technology Finance Corporation, a specialty finance company, lends to and invests in development-stage companies in the United States. The company has a P/E ratio of 10.41. Currently there are 2 analysts that rate Horizon Technology Finance Corp BDC a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Horizon Technology Finance Corp BDC has been 71,400 shares per day over the past 30 days. Horizon Technology Finance Corp BDC has a market cap of $140.5 million and is part of the financial services industry. Shares are down 2.5% year to date as of the close of trading on Monday.

TheStreet Ratings rates Horizon Technology Finance Corp BDC 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 came in higher than the industry average of 10.1%. Since the same quarter one year prior, revenues rose by 28.4%. 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 gross profit margin for HORIZON TECHNOLOGY FINANCE is rather high; currently it is at 62.30%. Regardless of HRZN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HRZN's net profit margin of -55.56% significantly underperformed when compared to the industry average.
  • HORIZON TECHNOLOGY FINANCE 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, HORIZON TECHNOLOGY FINANCE reported lower earnings of $0.56 versus $1.44 in the prior year. This year, the market expects an improvement in earnings ($1.42 versus $0.56).
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, HORIZON TECHNOLOGY FINANCE underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The share price of HORIZON TECHNOLOGY FINANCE has not done very well: it is down 13.92% 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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Eagle Rock Energy Partners

Dividend Yield: 9.20%

Eagle Rock Energy Partners (NASDAQ: EROC) shares currently have a dividend yield of 9.20%.

Eagle Rock Energy Partners, L.P., together with its subsidiaries, engages in gathering, compressing, treating, processing, transporting, marketing, and trading natural gas, as well as fractionating and transporting natural gas liquids (NGL). Currently there are 3 analysts that rate Eagle Rock Energy Partners a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Eagle Rock Energy Partners has been 503,500 shares per day over the past 30 days. Eagle Rock Energy Partners has a market cap of $1.4 billion and is part of the energy industry. Shares are up 11% year to date as of the close of trading on Monday.

TheStreet Ratings rates Eagle Rock Energy Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 2.9%. Since the same quarter one year prior, revenues rose by 41.6%. 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 remained constant at $34.50 million with no significant change when compared to the same quarter last year. Despite stable cash flow, EAGLE ROCK ENERGY PARTNRS LP's cash flow growth rate is still lower than the industry average growth rate of 29.14%.
  • EAGLE ROCK ENERGY PARTNRS LP 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, EAGLE ROCK ENERGY PARTNRS LP swung to a loss, reporting -$1.11 versus $0.38 in the prior year. This year, the market expects an improvement in earnings ($0.21 versus -$1.11).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, EAGLE ROCK ENERGY PARTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for EAGLE ROCK ENERGY PARTNRS LP is currently extremely low, coming in at 7.80%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -17.65% is significantly below 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.

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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