4 Hold-Rated Dividend Stocks: MTR, NKA, STON, QRE

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: 8.40%

Mesa Royalty (NYSE: MTR) shares currently have a dividend yield of 8.40%.

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 14.15.

The average volume for Mesa Royalty has been 5,300 shares per day over the past 30 days. Mesa Royalty has a market cap of $48.0 million and is part of the financial services industry. Shares are up 30.9% year to date as of the close of trading on Thursday.

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 8.8%. 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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Niska Gas Storage Partners

Dividend Yield: 9.40%

Niska Gas Storage Partners (NYSE: NKA) shares currently have a dividend yield of 9.40%.

Niska Gas Storage Partners LLC owns and operates natural gas storage assets in North America.

The average volume for Niska Gas Storage Partners has been 140,300 shares per day over the past 30 days. Niska Gas Storage Partners has a market cap of $511.2 million and is part of the utilities industry. Shares are up 32.5% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Niska Gas Storage Partners as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance and expanding profit margins. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive.

Highlights from the ratings report include:
  • Compared to its closing price of one year ago, NKA's share price has jumped by 25.64%, exceeding the performance of the broader market during that same time frame. 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.
  • NISKA GAS STORAGE PARTNERS 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 reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, NISKA GAS STORAGE PARTNERS continued to lose money by earning -$0.63 versus -$2.38 in the prior year. This year, the market expects an improvement in earnings ($0.57 versus -$0.63).
  • The revenue fell significantly faster than the industry average of 8.8%. Since the same quarter one year prior, revenues fell by 44.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for NISKA GAS STORAGE PARTNERS is rather high; currently it is at 56.70%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, NKA's net profit margin of -2.83% significantly underperformed when compared to the industry average.
  • 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 108.2% when compared to the same quarter one year ago, falling from $15.64 million to -$1.28 million.

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Stonemor Partners

Dividend Yield: 8.60%

Stonemor Partners (NYSE: STON) shares currently have a dividend yield of 8.60%.

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 102,800 shares per day over the past 30 days. Stonemor Partners has a market cap of $590.6 million and is part of the diversified services industry. Shares are up 29.1% year to date as of the close of trading on Thursday.

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 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 and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 13.6%. 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 -17.07%.
  • 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. 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.
  • 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. We feel it is likely to report a decline in earnings 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. For the next year, the market is expecting a contraction of 106.3% in earnings (-$0.33 versus -$0.16).
  • 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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QR Energy

Dividend Yield: 11.30%

QR Energy (NYSE: QRE) shares currently have a dividend yield of 11.30%.

QR Energy, LP, through its subsidiary, QRE Operating, LLC, engages in the acquisition, exploitation, development, and production of oil and natural gas properties in the United States. The company has a P/E ratio of 49.37.

The average volume for QR Energy has been 385,400 shares per day over the past 30 days. QR Energy has a market cap of $1.0 billion and is part of the energy industry. Shares are up 4.4% year to date as of the close of trading on Thursday.

TheStreet Ratings rates QR Energy as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and generally higher debt management risk.

Highlights from the ratings report include:
  • QRE's very impressive revenue growth greatly exceeded the industry average of 8.8%. Since the same quarter one year prior, revenues leaped by 59.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • QR ENERGY LP has improved earnings per share by 12.8% 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, QR ENERGY LP increased its bottom line by earning $0.54 versus $0.35 in the prior year. This year, the market expects an improvement in earnings ($1.14 versus $0.54).
  • The debt-to-equity ratio of 1.14 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, QR ENERGY LP's return on equity is significantly below that of the industry average and is below that of 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.

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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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