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."

New Mountain Finance

Dividend Yield: 9.10%

New Mountain Finance (NYSE: NMFC) shares currently have a dividend yield of 9.10%.

New Mountain Finance Corporation operates as a closed-end, non-diversified management investment company.

The average volume for New Mountain Finance has been 377,500 shares per day over the past 30 days. New Mountain Finance has a market cap of $363.6 million and is part of the conglomerates industry. Shares are up 1.1% 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 4.7%. 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 change in net income from the same quarter one year ago has exceeded that of the Capital Markets industry average, but is less 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. Despite a decrease in cash flow NEW MOUNTAIN FINANCE CORP is still fairing well by exceeding its industry average cash flow growth rate of -121.89%.

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Whitestone REIT

Dividend Yield: 7.10%

Whitestone REIT (NYSE: WSR) shares currently have a dividend yield of 7.10%.

No company description available. The company has a P/E ratio of 94.31.

The average volume for Whitestone REIT has been 87,800 shares per day over the past 30 days. Whitestone REIT has a market cap of $274.1 million and is part of the real estate industry. Shares are up 18.4% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Whitestone REIT as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 16.4%. Since the same quarter one year prior, revenues rose by 34.7%. 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.
  • 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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
  • WHITESTONE REIT 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, WHITESTONE REIT reported lower earnings of $0.04 versus $0.11 in the prior year. This year, the market expects an improvement in earnings ($0.28 versus $0.04).
  • The gross profit margin for WHITESTONE REIT is rather low; currently it is at 23.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -10.19% is significantly below that of the industry average.
  • Net operating cash flow has decreased to $1.30 million or 39.05% 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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LRR Energy

Dividend Yield: 11.40%

LRR Energy (NYSE: LRE) shares currently have a dividend yield of 11.40%.

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.

The average volume for LRR Energy has been 216,900 shares per day over the past 30 days. LRR Energy has a market cap of $266.4 million and is part of the energy industry. Shares are down 8% year to date as of the close of trading on Thursday.

TheStreet Ratings rates LRR Energy as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. 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 0.7%. 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.
  • Net operating cash flow has increased to $17.63 million or 10.00% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 0.00%.
  • Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, LRR ENERGY LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • 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 $0.77 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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NTELOS Holdings

Dividend Yield: 11.90%

NTELOS Holdings (NASDAQ: NTLS) shares currently have a dividend yield of 11.90%.

NTELOS Holdings Corp., through its subsidiaries, provides digital wireless communications services to consumers and businesses primarily in Virginia and West Virginia, as well as parts of Maryland, North Carolina, Pennsylvania, Ohio, and Kentucky. The company has a P/E ratio of 16.42.

The average volume for NTELOS Holdings has been 161,700 shares per day over the past 30 days. NTELOS Holdings has a market cap of $302.8 million and is part of the telecommunications industry. Shares are up 7.7% year to date as of the close of trading on Thursday.

TheStreet Ratings rates NTELOS Holdings as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including poor profit margins, generally higher debt management risk and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • NTLS's revenue growth has slightly outpaced the industry average of 2.0%. Since the same quarter one year prior, revenues rose by 10.8%. 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 Wireless Telecommunication Services industry. The net income increased by 100.5% when compared to the same quarter one year prior, rising from -$60.54 million to $0.32 million.
  • The debt-to-equity ratio is very high at 11.10 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, NTLS has managed to keep a strong quick ratio of 2.01, which demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for NTELOS HOLDINGS CORP is currently lower than what is desirable, coming in at 26.90%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.27% significantly trails 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.

Deswell Industries

Dividend Yield: 7.50%

Deswell Industries (NASDAQ: DSWL) shares currently have a dividend yield of 7.50%.

Deswell Industries, Inc. engages in the manufacture and sale of injection-molded plastic parts and components, electronic products and subassemblies, and metallic molds and accessory parts for original equipment manufacturers and contract manufacturers.

The average volume for Deswell Industries has been 19,000 shares per day over the past 30 days. Deswell Industries has a market cap of $43.5 million and is part of the consumer non-durables industry. Shares are up 10.6% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates Deswell Industries 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, good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • DSWL 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 5.04, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has significantly increased by 74.53% to $5.61 million when compared to the same quarter last year. In addition, DESWELL INDUSTRIES INC has also modestly surpassed the industry average cash flow growth rate of 67.57%.
  • DESWELL INDUSTRIES INC 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. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, DESWELL INDUSTRIES INC continued to lose money by earning -$0.09 versus -$0.50 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 Chemicals industry. The net income has significantly decreased by 342.9% when compared to the same quarter one year ago, falling from $0.09 million to -$0.22 million.
  • The gross profit margin for DESWELL INDUSTRIES INC is rather low; currently it is at 19.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.60% 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.

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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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