4 Hold-Rated Dividend Stocks: AGNC, ARR, NS, ORI

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."

American Capital Agency

Dividend Yield: 17.10%

American Capital Agency (NASDAQ: AGNC) shares currently have a dividend yield of 17.10%.

American Capital Agency Corp. operates as a real estate investment trust (REIT). The company has a P/E ratio of 13.60.

The average volume for American Capital Agency has been 7,284,800 shares per day over the past 30 days. American Capital Agency has a market cap of $11.6 billion and is part of the real estate industry. Shares are up 1.2% year to date as of the close of trading on Thursday.

TheStreet Ratings rates American Capital Agency as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels 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:
  • The gross profit margin for AMERICAN CAPITAL AGENCY CORP is currently very high, coming in at 91.90%. Regardless of AGNC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AGNC's net profit margin of 44.33% significantly outperformed against the industry.
  • The revenue fell significantly faster than the industry average of 9.6%. Since the same quarter one year prior, revenues fell by 28.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 64.0% when compared to the same quarter one year ago, falling from $641.00 million to $231.00 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN CAPITAL AGENCY CORP's return on equity is below that of both the industry average and the S&P 500.

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ARMOUR Residential REIT

Dividend Yield: 14.40%

ARMOUR Residential REIT (NYSE: ARR) shares currently have a dividend yield of 14.40%.

ARMOUR Residential REIT, Inc. is a real estate investment trust launched and managed by ARMOUR Residential Management LLC. It invests in the real estate markets of the United States. The company has a P/E ratio of 7.41.

The average volume for ARMOUR Residential REIT has been 7,602,600 shares per day over the past 30 days. ARMOUR Residential REIT has a market cap of $2.2 billion and is part of the real estate industry. Shares are down 7.6% year to date as of the close of trading on Thursday.

TheStreet Ratings rates ARMOUR Residential REIT as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • ARR's very impressive revenue growth greatly exceeded the industry average of 9.6%. Since the same quarter one year prior, revenues leaped by 115.9%. 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.
  • 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, ARMOUR RESIDENTIAL REIT INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • ARMOUR RESIDENTIAL REIT INC's earnings per share declined by 39.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ARMOUR RESIDENTIAL REIT INC increased its bottom line by earning $0.97 versus $0.02 in the prior year. For the next year, the market is expecting a contraction of 14.4% in earnings ($0.83 versus $0.97).
  • The share price of ARMOUR RESIDENTIAL REIT INC has not done very well: it is down 9.55% 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. 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.

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NuStar Energy L.P

Dividend Yield: 8.80%

NuStar Energy L.P (NYSE: NS) shares currently have a dividend yield of 8.80%.

NuStar Energy L.P. engages in the terminalling, storage, and transportation of petroleum products primarily in the United States and the Netherlands. The company operates in three segments: Storage, Transportation, and Asphalt and Fuels Marketing.

The average volume for NuStar Energy L.P has been 343,100 shares per day over the past 30 days. NuStar Energy L.P has a market cap of $3.9 billion and is part of the energy industry. Shares are up 17% year to date as of the close of trading on Thursday.

TheStreet Ratings rates NuStar Energy L.P as a hold. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The revenue fell significantly faster than the industry average of 8.8%. Since the same quarter one year prior, revenues fell by 42.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • NS's debt-to-equity ratio of 0.96 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further.
  • NUSTAR 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 two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, NUSTAR ENERGY LP swung to a loss, reporting -$2.95 versus $2.79 in the prior year. This year, the market expects an improvement in earnings ($1.91 versus -$2.95).
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 7.4% when compared to the same quarter one year ago, dropping from $26.35 million to $24.40 million.
  • 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, NUSTAR ENERGY LP's return on equity significantly trails that of both the industry average and the S&P 500.

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Old Republic International

Dividend Yield: 5.00%

Old Republic International (NYSE: ORI) shares currently have a dividend yield of 5.00%.

Old Republic International Corporation, through its subsidiaries, engages in underwriting insurance products primarily in the United States and Canada.

The average volume for Old Republic International has been 1,945,000 shares per day over the past 30 days. Old Republic International has a market cap of $3.8 billion and is part of the insurance industry. Shares are up 32.1% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Old Republic International as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and compelling growth in net income. 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:
  • Since the same quarter one year prior, revenues slightly increased by 9.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has significantly increased by 192.24% to $143.20 million when compared to the same quarter last year.
  • OLD REPUBLIC INTL CORP has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. 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, OLD REPUBLIC INTL CORP continued to lose money by earning -$0.27 versus -$0.55 in the prior year. This year, the market expects an improvement in earnings ($0.45 versus -$0.27).
  • ORI's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • The gross profit margin for OLD REPUBLIC INTL CORP is currently extremely low, coming in at 7.10%. Regardless of ORI's low profit margin, it has managed to increase from the same period last year.

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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