5 Hold-Rated Dividend Stocks: RWT, RPAI, NRF, VALE, BMO

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."

Redwood

Dividend Yield: 5.30%

Redwood (NYSE: RWT) shares currently have a dividend yield of 5.30%.

Redwood Trust, Inc. engages in investing, financing, and managing real estate-related assets. The company has a P/E ratio of 11.10.

The average volume for Redwood has been 1,170,800 shares per day over the past 30 days. Redwood has a market cap of $1.7 billion and is part of the real estate industry. Shares are up 24.1% 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 86.48% and other important driving factors, this stock has surged by 66.12% 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 ($1.90 versus $1.59).
  • The gross profit margin for REDWOOD TRUST INC is rather high; currently it is at 59.60%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, RWT's net profit margin of 113.23% significantly outperformed against the industry.
  • RWT, with its decline in revenue, underperformed when compared the industry average of 12.0%. Since the same quarter one year prior, revenues slightly dropped by 8.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Net operating cash flow has decreased to -$287.03 million or 22.83% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, REDWOOD TRUST INC has marginally lower results.

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Retail Properties of American

Dividend Yield: 4.20%

Retail Properties of American (NYSE: RPAI) shares currently have a dividend yield of 4.20%.

Inland Western Retail Real Estate Trust, Inc. is a real estate investment trust. It engages in acquisition, development and management of properties. The trust invests in the real estate markets of United States. The company has a P/E ratio of 530.67.

The average volume for Retail Properties of American has been 844,300 shares per day over the past 30 days. Retail Properties of American has a market cap of $2.9 billion and is part of the real estate industry. Shares are up 32% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Retail Properties of American as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income and notable return on equity. 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:
  • Powered by its strong earnings growth of 66.66% and other important driving factors, this stock has surged by 71.33% over the past year, outperforming the rise in the S&P 500 Index during the same period.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 88.5% when compared to the same quarter one year prior, rising from -$16.29 million to -$1.88 million.
  • Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, RETAIL PPTYS OF AMERICA INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • RETAIL PPTYS OF AMERICA INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. For the next year, the market is expecting a contraction of 300.0% in earnings (-$0.12 versus -$0.03).
  • The gross profit margin for RETAIL PPTYS OF AMERICA INC is rather low; currently it is at 24.90%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.34% is significantly below that of the industry average.

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Northstar Realty Finance Corporation

Dividend Yield: 8.00%

Northstar Realty Finance Corporation (NYSE: NRF) shares currently have a dividend yield of 8.00%.

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 3,257,500 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 34.7% 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 the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • NRF's revenue growth has slightly outpaced the industry average of 12.0%. Since the same quarter one year prior, revenues rose by 20.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 160.60% and other important driving factors, this stock has surged by 79.65% 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.
  • 50.00% is the gross profit margin for NORTHSTAR REALTY FINANCE CP which we consider to be strong. Regardless of NRF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NRF's net profit margin of 34.37% compares favorably to the industry average.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. 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.

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Vale

Dividend Yield: 4.70%

Vale (NYSE: VALE) shares currently have a dividend yield of 4.70%.

Vale S.A. engages in the research, production, and marketing of iron ore and pellets, nickel, fertilizers, copper, coal, manganese, ferroalloys, cobalt, platinum group metals, and precious metals in Brazil and internationally. The company has a P/E ratio of 14.96.

The average volume for Vale has been 19,141,200 shares per day over the past 30 days. Vale has a market cap of $82.5 billion and is part of the metals & mining industry. Shares are down 22.5% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Vale 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 a generally disappointing performance in the stock itself, deteriorating net income and weak operating cash flow.

Highlights from the ratings report include:
  • The current debt-to-equity ratio, 0.43, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.22, which illustrates the ability to avoid short-term cash problems.
  • 45.60% is the gross profit margin for VALE SA 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, VALE's net profit margin of -20.55% 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 Metals & Mining industry. The net income has significantly decreased by 164.7% when compared to the same quarter one year ago, falling from $4,363.78 million to -$2,822.29 million.
  • The share price of VALE SA has not done very well: it is down 24.40% 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, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

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.

Bank of Montreal

Dividend Yield: 4.80%

Bank of Montreal (NYSE: BMO) shares currently have a dividend yield of 4.80%.

Bank of Montreal, together with its subsidiaries, provides various retail banking, wealth management, and investment banking products and services in North America and internationally. The company has a P/E ratio of 10.00.

The average volume for Bank of Montreal has been 493,200 shares per day over the past 30 days. Bank of Montreal has a market cap of $39.6 billion and is part of the banking industry. Shares are up 0% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Bank of Montreal as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, increase in stock price during the past year and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and weak operating cash flow.

Highlights from the ratings report include:
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Commercial Banks industry and the overall market, BANK OF MONTREAL's return on equity exceeds that of both the industry average and the S&P 500.
  • 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.
  • The gross profit margin for BANK OF MONTREAL is currently very high, coming in at 83.90%. Regardless of BMO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 19.64% trails the industry average.
  • Net operating cash flow has significantly decreased to $10,656.00 million or 55.67% when compared to the same quarter last year. Despite a decrease in cash flow BANK OF MONTREAL is still fairing well by exceeding its industry average cash flow growth rate of -67.32%.
  • 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 greatly underperformed compared to the Commercial Banks industry average. The net income has decreased by 5.5% when compared to the same quarter one year ago, dropping from $1,090.00 million to $1,030.00 million.

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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