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."

KKR Financial Holdings

Dividend Yield: 8.10%

KKR Financial Holdings (NYSE: KFN) shares currently have a dividend yield of 8.10%.

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 5.57.

The average volume for KKR Financial Holdings has been 1,098,700 shares per day over the past 30 days. KKR Financial Holdings has a market cap of $2.1 billion and is part of the real estate industry. Shares are down 0.3% year to date as of the close of trading on Tuesday.

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 increase in stock price during the past year. 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 7.2%. 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.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of 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 -111.93%.
  • 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.

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Cypress Semiconductor Corporation

Dividend Yield: 4.60%

Cypress Semiconductor Corporation (NASDAQ: CY) shares currently have a dividend yield of 4.60%.

Cypress Semiconductor Corporation, together with its subsidiaries, designs, develops, manufactures, and markets mixed-signal, programmable solutions, specialized semiconductor memories, and integrated semiconductor solutions.

The average volume for Cypress Semiconductor Corporation has been 3,600,200 shares per day over the past 30 days. Cypress Semiconductor Corporation has a market cap of $1.4 billion and is part of the electronics industry. Shares are down 11.4% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Cypress Semiconductor Corporation as a hold. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:
  • Despite the weak revenue results, CY has outperformed against the industry average of 17.0%. Since the same quarter one year prior, revenues slightly dropped by 6.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • 44.70% is the gross profit margin for CYPRESS SEMICONDUCTOR CORP 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, CY's net profit margin of -16.32% significantly underperformed when compared to the industry average.
  • CYPRESS SEMICONDUCTOR CORP's earnings per share declined by 46.1% 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. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CYPRESS SEMICONDUCTOR CORP swung to a loss, reporting -$0.16 versus $0.89 in the prior year. This year, the market expects an improvement in earnings ($0.49 versus -$0.16).
  • The debt-to-equity ratio of 1.48 is relatively high when compared with the industry average, suggesting a need for better debt level management.
  • 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 Semiconductors & Semiconductor Equipment industry and the overall market, CYPRESS SEMICONDUCTOR CORP's return on equity significantly trails that of both the industry average and 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.

Redwood

Dividend Yield: 4.90%

Redwood (NYSE: RWT) shares currently have a dividend yield of 4.90%.

Redwood Trust, Inc. engages in investing, financing, and managing real estate-related assets. The company has a P/E ratio of 14.32.

The average volume for Redwood has been 1,062,400 shares per day over the past 30 days. Redwood has a market cap of $1.9 billion and is part of the real estate industry. Shares are up 34.9% year to date as of the close of trading on Tuesday.

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 92.45% 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 ($1.97 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.

Northstar Realty Finance Corporation

Dividend Yield: 7.60%

Northstar Realty Finance Corporation (NYSE: NRF) shares currently have a dividend yield of 7.60%.

NorthStar Realty Finance Corp., a real estate investment trust (REIT), operates as a commercial real estate (CRE) investment and asset management company in the United States.

The average volume for Northstar Realty Finance Corporation has been 3,580,900 shares per day over the past 30 days. Northstar Realty Finance Corporation has a market cap of $1.9 billion and is part of the real estate industry. Shares are up 37.5% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Northstar Realty Finance Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and impressive record of earnings per share growth. 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:
  • NRF's very impressive revenue growth greatly exceeded the industry average of 16.5%. Since the same quarter one year prior, revenues leaped by 51.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 75.29% and other important driving factors, this stock has surged by 86.50% 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.
  • The gross profit margin for NORTHSTAR REALTY FINANCE CP is rather high; currently it is at 68.30%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -9.47% is in-line with the industry average.
  • 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, NORTHSTAR REALTY FINANCE CP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $14.68 million or 41.36% 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.

Banco Santander

Dividend Yield: 8.70%

Banco Santander (NYSE: SAN) shares currently have a dividend yield of 8.70%.

Banco Santander-Chile provides commercial and retail banking services to corporate and individual customers in Chile.

The average volume for Banco Santander has been 6,368,300 shares per day over the past 30 days. Banco Santander has a market cap of $70.6 billion and is part of the banking industry. Shares are down 10.5% year to date as of the close of trading on Tuesday.

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.

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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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