5 Hold-Rated Dividend Stocks: TCPC, NKA, CHRM, KFN, HGT

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."

TCP Capital

Dividend Yield: 9.00%

TCP Capital (NASDAQ: TCPC) shares currently have a dividend yield of 9.00%.

TCP Capital Corp. is a business development company specializing in investments in debt of public and private middle market companies. The fund also provides leveraged loans. It seeks to invests in the United States. The company has a P/E ratio of 13.20.

The average volume for TCP Capital has been 164,300 shares per day over the past 30 days. TCP Capital has a market cap of $343.0 million and is part of the real estate industry. Shares are up 8.3% year to date as of the close of trading on Friday.

TheStreet Ratings rates TCP Capital as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the stock has experienced relatively poor performance when compared with the S&P 500 during the past year.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 6.4%. Since the same quarter one year prior, revenues rose by 42.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • TCP CAPITAL CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.69 versus $1.20).
  • Net operating cash flow has remained constant at $6.11 million with no significant change when compared to the same quarter last year. Even though TCP CAPITAL CORP's cash flow growth was minimal, the firm managed to surpass its industry's average growth rate of -272.20%.
  • 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. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • When compared to other companies in the Capital Markets industry and the overall market, TCP CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.

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Niska Gas Storage Partners

Dividend Yield: 9.70%

Niska Gas Storage Partners (NYSE: NKA) shares currently have a dividend yield of 9.70%.

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 144,800 shares per day over the past 30 days. Niska Gas Storage Partners has a market cap of $499.1 million and is part of the utilities industry. Shares are up 32.8% year to date as of the close of trading on Friday.

TheStreet Ratings rates Niska Gas Storage Partners as a hold. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year 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 where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
  • 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 ($0.59 versus -$0.63).
  • The revenue fell significantly faster than the industry average of 9.7%. 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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Charm Communications

Dividend Yield: 8.90%

Charm Communications (NASDAQ: CHRM) shares currently have a dividend yield of 8.90%.

Charm Communications Inc. operates as an integrated advertising agency in the People's Republic of China. It operates in three segments: Media Investment Management, Advertising Agency, and Branding and Identity Services.

The average volume for Charm Communications has been 6,300 shares per day over the past 30 days. Charm Communications has a market cap of $214.3 million and is part of the media industry. Shares are up 38.4% year to date as of the close of trading on Friday.

TheStreet Ratings rates Charm Communications as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, 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 1.2%. Since the same quarter one year prior, revenues rose by 13.6%. 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.
  • CHRM 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.48, which illustrates the ability to avoid short-term cash problems.
  • CHARM COMMUNICATIONS INC 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, CHARM COMMUNICATIONS INC swung to a loss, reporting -$0.12 versus $1.12 in the prior year. This year, the market expects an improvement in earnings ($0.28 versus -$0.12).
  • 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 Media industry and the overall market, CHARM COMMUNICATIONS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for CHARM COMMUNICATIONS INC is currently lower than what is desirable, coming in at 25.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -4.58% is significantly below that of the industry average.

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KKR Financial Holdings

Dividend Yield: 7.90%

KKR Financial Holdings (NYSE: KFN) shares currently have a dividend yield of 7.90%.

KKR Financial Holdings LLC, together with its subsidiaries, operates as a specialty finance company with expertise in a range of asset classes. The company has a P/E ratio of 5.71.

The average volume for KKR Financial Holdings has been 880,100 shares per day over the past 30 days. KKR Financial Holdings has a market cap of $2.2 billion and is part of the real estate industry. Shares are up 0.1% year to date as of the close of trading on Friday.

TheStreet Ratings rates KKR Financial Holdings as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and increase in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 4.1%. Since the same quarter one year prior, revenues rose by 17.2%. 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 gross profit margin for KKR FINANCIAL HOLDINGS LLC is currently very high, coming in at 77.40%. It has increased significantly from the same period last year. Along with this, the net profit margin of 40.33% significantly outperformed against the industry average.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Diversified Financial Services industry average. The net income increased by 11.7% when compared to the same quarter one year prior, going from $88.05 million to $98.34 million.
  • Net operating cash flow has decreased to $39.68 million or 11.26% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio is very high at 2.43 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.

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Hugoton Royalty

Dividend Yield: 10.60%

Hugoton Royalty (NYSE: HGT) shares currently have a dividend yield of 10.60%.

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 18.06.

The average volume for Hugoton Royalty has been 159,100 shares per day over the past 30 days. Hugoton Royalty has a market cap of $382.8 million and is part of the energy industry. Shares are up 30.9% 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 solid stock price performance, 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:
  • Compared to its closing price of one year ago, HGT's share price has jumped by 34.91%, 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.
  • 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 96.92% significantly outperformed against the industry.
  • HUGOTON ROYALTY TRUST's earnings per share declined by 20.0% 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, 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 underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 20.4% when compared to the same quarter one year ago, dropping from $9.83 million to $7.82 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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