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."

Mesa Royalty

Dividend Yield: 8.50%

Mesa Royalty (NYSE: MTR) shares currently have a dividend yield of 8.50%.

Mesa Royalty Trust holds net overriding royalty interests in various oil and gas producing properties in the United States. It has interests in properties that are located in the Hugoton field of Kansas; the San Juan Basin field of New Mexico and Colorado; and the Yellow Creek field of Wyoming. The company has a P/E ratio of 11.10.

The average volume for Mesa Royalty has been 5,400 shares per day over the past 30 days. Mesa Royalty has a market cap of $45.9 million and is part of the financial services industry. Shares are up 27.7% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Mesa Royalty as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • MTR has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 9.27, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for MESA ROYALTY TRUST is currently very high, coming in at 100.00%. MTR has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, MTR's net profit margin of 93.48% significantly outperformed against the industry.
  • MTR, with its very weak revenue results, has greatly underperformed against the industry average of 1.7%. Since the same quarter one year prior, revenues plummeted by 64.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • MESA ROYALTY TRUST 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 suffered a declining pattern earnings per share over the past two years. During the past fiscal year, MESA ROYALTY TRUST reported lower earnings of $2.96 versus $3.51 in the prior year.
  • 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 66.4% when compared to the same quarter one year ago, falling from $2.05 million to $0.69 million.

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Resource Capital Corporation

Dividend Yield: 12.10%

Resource Capital Corporation (NYSE: RSO) shares currently have a dividend yield of 12.10%.

Resource Capital Corp. operates as a specialty finance company that focuses primarily on commercial real estate and commercial finance in the United States. The company has a P/E ratio of 9.31. Currently there are no analysts that rate Resource Capital Corporation a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Resource Capital Corporation has been 1,095,000 shares per day over the past 30 days. Resource Capital Corporation has a market cap of $714.1 million and is part of the real estate industry. Shares are up 18% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Resource Capital Corporation as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 16.4%. Since the same quarter one year prior, revenues rose by 48.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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. Although other factors naturally played a role, the company's strong earnings growth was key. 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, RESOURCE CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The gross profit margin for RESOURCE CAPITAL CORP is rather high; currently it is at 52.10%. Regardless of RSO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RSO's net profit margin of 29.89% compares favorably to the industry average.

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Memorial Production Partners

Dividend Yield: 10.20%

Memorial Production Partners (NASDAQ: MEMP) shares currently have a dividend yield of 10.20%.

Memorial Production Partners LP, through its subsidiary, Memorial Production Operating LLC, engages in the acquisition, development, exploitation, and production of oil and natural gas properties. The company has a P/E ratio of 1981.20. Currently there are 5 analysts that rate Memorial Production Partners a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Memorial Production Partners has been 501,200 shares per day over the past 30 days. Memorial Production Partners has a market cap of $573.2 million and is part of the energy industry. Shares are up 11.1% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Memorial Production Partners 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 expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • MEMP's very impressive revenue growth greatly exceeded the industry average of 1.7%. Since the same quarter one year prior, revenues leaped by 110.6%. 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.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 74.7% when compared to the same quarter one year prior, rising from $6.34 million to $11.08 million.
  • Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MEMORIAL PRODUCTION PRTRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • MEMORIAL PRODUCTION PRTRS LP's earnings per share declined by 36.7% 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, MEMORIAL PRODUCTION PRTRS LP swung to a loss, reporting -$0.01 versus $0.30 in the prior year. This year, the market expects an improvement in earnings ($1.90 versus -$0.01).
  • The debt-to-equity ratio of 1.15 is relatively high when compared with the industry average, suggesting a need for better debt level management.

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.

New Mountain Finance

Dividend Yield: 9.30%

New Mountain Finance (NYSE: NMFC) shares currently have a dividend yield of 9.30%.

New Mountain Finance Corporation operates as a closed-end, non-diversified management investment company. Currently there are 3 analysts that rate New Mountain Finance a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for New Mountain Finance has been 287,500 shares per day over the past 30 days. New Mountain Finance has a market cap of $356.1 million and is part of the conglomerates industry. Shares are down 1.9% year to date as of the close of trading on Thursday.

TheStreet Ratings rates New Mountain Finance as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 11.3%. Since the same quarter one year prior, revenues rose by 44.3%. 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 NEW MOUNTAIN FINANCE CORP is rather high; currently it is at 66.00%. Regardless of NMFC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NMFC's net profit margin of 68.78% significantly outperformed against the industry.
  • 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 Capital Markets industry and the overall market on the basis of return on equity, NEW MOUNTAIN FINANCE CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Capital Markets industry average, but is greater than that of the S&P 500. The net income has decreased by 4.8% when compared to the same quarter one year ago, dropping from $17.86 million to $17.00 million.
  • Net operating cash flow has significantly decreased to -$128.89 million or 100.62% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly 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.

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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