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: 8.60%

Mesa Royalty (NYSE: MTR) shares currently have a dividend yield of 8.60%.

Mesa Royalty Trust holds net overriding royalty interests in various oil and gas producing properties in the United States. It has interests in properties 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 13.00.

The average volume for Mesa Royalty has been 4,900 shares per day over the past 30 days. Mesa Royalty has a market cap of $46.8 million and is part of the financial services industry. Shares are up 29.5% year to date as of the close of trading on Friday.

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 7.61, 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 97.07% significantly outperformed against the industry.
  • The revenue fell significantly faster than the industry average of 6.7%. Since the same quarter one year prior, revenues fell by 47.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • MESA ROYALTY TRUST's earnings per share declined by 38.4% 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, MESA ROYALTY TRUST reported lower earnings of $1.93 versus $2.96 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 48.2% when compared to the same quarter one year ago, falling from $1.60 million to $0.83 million.

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Hugoton Royalty

Dividend Yield: 8.60%

Hugoton Royalty (NYSE: HGT) shares currently have a dividend yield of 8.60%.

Hugoton Royalty Trust operates as an express trust in the United States. The company holds an 80% net profits interests in certain natural gas producing working interest properties of XTO Energy Inc. XTO Energy Inc. The company has a P/E ratio of 15.33.

The average volume for Hugoton Royalty has been 169,400 shares per day over the past 30 days. Hugoton Royalty has a market cap of $355.6 million and is part of the energy industry. Shares are up 22.2% year to date as of the close of trading on Friday.

TheStreet Ratings rates Hugoton 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 and expanding profit margins. 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 disappointing return on equity.

Highlights from the ratings report include:
  • HGT 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.
  • The gross profit margin for HUGOTON ROYALTY TRUST is currently very high, coming in at 100.00%. HGT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, HGT's net profit margin of 61.73% significantly outperformed against the industry.
  • The revenue fell significantly faster than the industry average of 6.7%. Since the same quarter one year prior, revenues fell by 41.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • HUGOTON 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 reported a trend of declining earnings per share over the past two years. During the past fiscal year, HUGOTON ROYALTY TRUST reported lower earnings of $0.58 versus $1.40 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 63.8% when compared to the same quarter one year ago, falling from $13.09 million to $4.74 million.

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Stonemor Partners

Dividend Yield: 9.00%

Stonemor Partners (NYSE: STON) shares currently have a dividend yield of 9.00%.

StoneMor Partners L.P., together with its subsidiaries, engages in the ownership and operation of cemeteries in the United States. It operates through Cemetery Operations Southeast, Cemetery Operations Northeast, Cemetery Operations West, and Funeral Homes segments.

The average volume for Stonemor Partners has been 108,300 shares per day over the past 30 days. Stonemor Partners has a market cap of $523.1 million and is part of the diversified services industry. Shares are up 27.2% year to date as of the close of trading on Friday.

TheStreet Ratings rates Stonemor Partners 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 unimpressive growth in net income and generally higher debt management risk.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 11.2%. Since the same quarter one year prior, revenues slightly increased by 1.0%. 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.
  • Net operating cash flow has significantly increased by 119.61% to $1.10 million when compared to the same quarter last year. In addition, STONEMOR PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -297.77%.
  • STONEMOR PARTNERS LP's earnings per share declined by 25.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, STONEMOR PARTNERS LP continued to lose money by earning -$0.16 versus -$0.53 in the prior year. This year, the market expects an improvement in earnings (-$0.15 versus -$0.16).
  • The change in net income from the same quarter one year ago has exceeded that of the Diversified Consumer Services industry average, but is less than that of the S&P 500. The net income has significantly decreased by 27.2% when compared to the same quarter one year ago, falling from -$3.09 million to -$3.94 million.
  • Currently the debt-to-equity ratio of 1.89 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Regardless of the company's weak debt-to-equity ratio, STON has managed to keep a strong quick ratio of 1.81, which demonstrates the ability to cover short-term cash needs.

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Compressco Partners

Dividend Yield: 7.70%

Compressco Partners (NASDAQ: GSJK) shares currently have a dividend yield of 7.70%.

Compressco Partners, L.P. provides compression-based production enhancement services for natural gas and oil exploration and production companies. Its production enhancement services are used in both conventional wellhead compression applications and unconventional compression applications. The company has a P/E ratio of 21.46.

The average volume for Compressco Partners has been 15,000 shares per day over the past 30 days. Compressco Partners has a market cap of $203.7 million and is part of the energy industry. Shares are up 32.3% year to date as of the close of trading on Friday.

TheStreet Ratings rates Compressco Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.1%. Since the same quarter one year prior, revenues rose by 23.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • GSJK's debt-to-equity ratio is very low at 0.06 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, GSJK has a quick ratio of 1.54, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has increased to $8.53 million or 18.82% when compared to the same quarter last year. Despite an increase in cash flow, COMPRESSCO PARTNERS LP's cash flow growth rate is still lower than the industry average growth rate of 34.56%.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Energy Equipment & Services industry and the overall market, COMPRESSCO PARTNERS LP's return on equity is below 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.

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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