4 Hold-Rated Dividend Stocks: TGS, ANH, NTLS, EROC

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."

Transportadora de Gas del Sur

Dividend Yield: 9.00%

Transportadora de Gas del Sur (NYSE: TGS) shares currently have a dividend yield of 9.00%.

Transportadora de Gas del Sur S.A. engages in the transportation of natural gas primarily in Latin America. The company has a P/E ratio of 1.14.

The average volume for Transportadora de Gas del Sur has been 44,700 shares per day over the past 30 days. Transportadora de Gas del Sur has a market cap of $294.0 million and is part of the utilities industry. Shares are up 5.1% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Transportadora de Gas del Sur as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. 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 weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 9.8%. Since the same quarter one year prior, revenues rose by 20.1%. 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 debt-to-equity ratio is somewhat low, currently at 0.92, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, TGS has a quick ratio of 1.68, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 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 Gas Utilities industry average. The net income has decreased by 14.2% when compared to the same quarter one year ago, dropping from $23.10 million to $19.83 million.
  • Net operating cash flow has decreased to $24.13 million or 28.26% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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Anworth Mortgage Asset Corporation

Dividend Yield: 10.00%

Anworth Mortgage Asset Corporation (NYSE: ANH) shares currently have a dividend yield of 10.00%.

Anworth Mortgage Asset Corporation operates as a real estate investment trust in the United States. The company primarily invests in the United States agency mortgage-backed securities, which are securities representing obligations guaranteed by the U.S. The company has a P/E ratio of 9.73.

The average volume for Anworth Mortgage Asset Corporation has been 1,201,700 shares per day over the past 30 days. Anworth Mortgage Asset Corporation has a market cap of $873.5 million and is part of the real estate industry. Shares are up 2.6% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Anworth Mortgage Asset Corporation 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, disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The gross profit margin for ANWORTH MTG ASSET CORP is currently very high, coming in at 91.00%. Regardless of ANH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ANH's net profit margin of 54.18% significantly outperformed against the industry.
  • The revenue fell significantly faster than the industry average of 12.0%. Since the same quarter one year prior, revenues fell by 19.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • ANWORTH MTG ASSET CORP's earnings per share declined by 25.0% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, ANWORTH MTG ASSET CORP reported lower earnings of $0.68 versus $0.90 in the prior year. For the next year, the market is expecting a contraction of 22.1% in earnings ($0.53 versus $0.68).
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ANWORTH MTG ASSET CORP's return on equity is below that of both the industry average and the S&P 500.

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NTELOS Holdings

Dividend Yield: 10.70%

NTELOS Holdings (NASDAQ: NTLS) shares currently have a dividend yield of 10.70%.

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 21.12.

The average volume for NTELOS Holdings has been 159,800 shares per day over the past 30 days. NTELOS Holdings has a market cap of $335.5 million and is part of the telecommunications industry. Shares are up 19.2% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates NTELOS Holdings as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including poor profit margins, a generally disappointing performance in the stock itself and unimpressive growth in net income.

Highlights from the ratings report include:
  • NTLS's revenue growth has slightly outpaced the industry average of 1.8%. Since the same quarter one year prior, revenues slightly increased by 8.0%. 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.
  • 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. Compared to other companies in the Wireless Telecommunication Services industry and the overall market, NTELOS HOLDINGS CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • NTELOS HOLDINGS CORP's earnings per share declined by 32.4% 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, NTELOS HOLDINGS CORP reported lower earnings of $0.87 versus $1.04 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus $0.87).
  • The share price of NTELOS HOLDINGS CORP has not done very well: it is down 24.25% 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • The gross profit margin for NTELOS HOLDINGS CORP is currently lower than what is desirable, coming in at 30.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.60% trails that of the industry average.

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Eagle Rock Energy Partners

Dividend Yield: 10.20%

Eagle Rock Energy Partners (NASDAQ: EROC) shares currently have a dividend yield of 10.20%.

Eagle Rock Energy Partners, L.P., together with its subsidiaries, engages in gathering, compressing, treating, processing, transporting, marketing, and trading natural gas, as well as fractionating and transporting natural gas liquids (NGL).

The average volume for Eagle Rock Energy Partners has been 674,200 shares per day over the past 30 days. Eagle Rock Energy Partners has a market cap of $1.4 billion and is part of the energy industry. Shares are up 0% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Eagle Rock Energy 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 net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, 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 8.8%. Since the same quarter one year prior, revenues rose by 14.2%. Growth in the company's revenue appears to have helped boost the 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 Oil, Gas & Consumable Fuels industry. The net income increased by 33.4% when compared to the same quarter one year prior, rising from -$50.33 million to -$33.51 million.
  • EAGLE ROCK ENERGY PARTNRS LP has improved earnings per share by 42.5% 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, EAGLE ROCK ENERGY PARTNRS LP swung to a loss, reporting -$1.11 versus $0.38 in the prior year. This year, the market expects an improvement in earnings ($0.07 versus -$1.11).
  • The debt-to-equity ratio of 1.25 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, EROC maintains a poor quick ratio of 0.78, which illustrates the inability to avoid short-term cash problems.
  • 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, EAGLE ROCK ENERGY PARTNRS LP's return on equity significantly trails 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.

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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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