5 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 5 stocks with substantial yields, that ultimately, we have rated "Hold."

Pzena Investment Management

Dividend Yield: 10.50%

Pzena Investment Management (NYSE: PZN) shares currently have a dividend yield of 10.50%.

Pzena Investment Management, Inc. is a publicly owned investment manager. The company has a P/E ratio of 19.00.

The average volume for Pzena Investment Management has been 32,100 shares per day over the past 30 days. Pzena Investment Management has a market cap of $67.2 million and is part of the financial services industry. Shares are up 13.3% year to date as of the close of trading on Friday.

TheStreet Ratings rates Pzena Investment Management as a hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • PZENA INVESTMENT MANAGEMENT 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, PZENA INVESTMENT MANAGEMENT increased its bottom line by earning $0.32 versus $0.28 in the prior year. This year, the market expects an improvement in earnings ($0.38 versus $0.32).
  • 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 159.1% when compared to the same quarter one year prior, rising from $0.37 million to $0.96 million.
  • 49.10% is the gross profit margin for PZENA INVESTMENT MANAGEMENT which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, PZN's net profit margin of 4.95% significantly trails the industry average.
  • PZN has underperformed the S&P 500 Index, declining 6.47% 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.
  • Net operating cash flow has significantly decreased to -$1.29 million or 176.76% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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Ellington Financial

Dividend Yield: 12.00%

Ellington Financial (NYSE: EFC) shares currently have a dividend yield of 12.00%.

No company description available. The company has a P/E ratio of 4.83.

The average volume for Ellington Financial has been 129,400 shares per day over the past 30 days. Ellington Financial has a market cap of $523.4 million and is part of the real estate industry. Shares are up 14% year to date as of the close of trading on Friday.

TheStreet Ratings rates Ellington Financial as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins.

Highlights from the ratings report include:
  • 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 1357.1% when compared to the same quarter one year prior, rising from $1.70 million to $24.79 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.4%. Since the same quarter one year prior, revenues slightly increased by 7.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • ELLINGTON FINANCIAL LLC 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ELLINGTON FINANCIAL LLC increased its bottom line by earning $5.32 versus $0.61 in the prior year. For the next year, the market is expecting a contraction of 43.6% in earnings ($3.00 versus $5.32).
  • The gross profit margin for ELLINGTON FINANCIAL LLC is currently lower than what is desirable, coming in at 34.30%. It has decreased significantly from the same period last year. Despite the weak results of the gross profit margin, the net profit margin of 148.82% has significantly outperformed against the industry average.
  • Net operating cash flow has significantly decreased to -$236.70 million or 1511.35% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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Eagle Rock Energy Partners

Dividend Yield: 8.80%

Eagle Rock Energy Partners (NASDAQ: EROC) shares currently have a dividend yield of 8.80%.

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).

The average volume for Eagle Rock Energy Partners has been 526,100 shares per day over the past 30 days. Eagle Rock Energy Partners has a market cap of $1.6 billion and is part of the energy industry. Shares are up 16% year to date as of the close of trading on Friday.

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, increase in stock price during the past year 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 1.1%. 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.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • 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 20.63%.
  • 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.

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Mid-Con Energy Partners

Dividend Yield: 8.40%

Mid-Con Energy Partners (NASDAQ: MCEP) shares currently have a dividend yield of 8.40%.

Mid-Con Energy Partners, LP engages in the acquisition, exploitation, development, and production of oil and natural gas properties in North America. The company has a P/E ratio of 14.48.

The average volume for Mid-Con Energy Partners has been 77,800 shares per day over the past 30 days. Mid-Con Energy Partners has a market cap of $451.1 million and is part of the energy industry. Shares are up 25.5% year to date as of the close of trading on Friday.

TheStreet Ratings rates Mid-Con Energy Partners as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, robust revenue growth and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.

Highlights from the ratings report include:
  • Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MID-CON ENERGY PARTNERS -LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • MCEP's very impressive revenue growth greatly exceeded the industry average of 1.1%. Since the same quarter one year prior, revenues leaped by 269.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has slightly increased to $9.93 million or 3.90% when compared to the same quarter last year. Despite an increase in cash flow, MID-CON ENERGY PARTNERS -LP's cash flow growth rate is still lower than the industry average growth rate of 20.63%.
  • In its most recent trading session, MCEP has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • The debt-to-equity ratio of 1.08 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, MCEP's quick ratio is somewhat strong at 1.46, demonstrating the ability to handle short-term liquidity needs.

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.

Dominion Resources Black Warrior

Dividend Yield: 12.70%

Dominion Resources Black Warrior (NYSE: DOM) shares currently have a dividend yield of 12.70%.

Dominion Resources Black Warrior Trust operates as a grantor trust in the United States. The company has a P/E ratio of 9.35.

The average volume for Dominion Resources Black Warrior has been 56,400 shares per day over the past 30 days. Dominion Resources Black Warrior has a market cap of $39.6 million and is part of the financial services industry. Shares are up 72.2% year to date as of the close of trading on Friday.

TheStreet Ratings rates Dominion Resources Black Warrior 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:
  • DOM 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 92.70, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for DOMINION RES BLACK WARRIOR is currently very high, coming in at 100.00%. DOM has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, DOM's net profit margin of 81.10% significantly outperformed against the industry.
  • The revenue fell significantly faster than the industry average of 1.3%. Since the same quarter one year prior, revenues fell by 36.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • DOMINION RES BLACK WARRIOR's earnings per share declined by 39.1% 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 two years. During the past fiscal year, DOMINION RES BLACK WARRIOR reported lower earnings of $0.54 versus $0.93 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 41.8% when compared to the same quarter one year ago, falling from $1.84 million to $1.07 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.

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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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