3 Hold-Rated Dividend Stocks: FGP, DX, 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 3 stocks with substantial yields, that ultimately, we have rated "Hold."

Ferrellgas Partners

Dividend Yield: 9.10%

Ferrellgas Partners (NYSE: FGP) shares currently have a dividend yield of 9.10%.

Ferrellgas Partners, L.P. engages in the distribution and sale of propane, and related equipment and supplies primarily in the United States. It transports propane to propane distribution locations, tanks on customers' premises, or to portable propane tanks delivered to retailers. The company has a P/E ratio of 36.03.

The average volume for Ferrellgas Partners has been 219,900 shares per day over the past 30 days. Ferrellgas Partners has a market cap of $1.7 billion and is part of the energy industry. Shares are up 30.4% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Ferrellgas Partners as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. 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:
  • FERRELLGAS PARTNERS -LP 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, FERRELLGAS PARTNERS -LP continued to lose money by earning -$0.14 versus -$0.58 in the prior year. This year, the market expects an improvement in earnings ($0.70 versus -$0.14).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Gas Utilities industry. The net income increased by 114.7% when compared to the same quarter one year prior, rising from $20.81 million to $44.68 million.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • FGP, with its decline in revenue, underperformed when compared the industry average of 9.7%. Since the same quarter one year prior, revenues slightly dropped by 4.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for FERRELLGAS PARTNERS -LP is rather low; currently it is at 19.20%. Regardless of FGP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.40% trails the industry average.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

Dynex Capital

Dividend Yield: 11.10%

Dynex Capital (NYSE: DX) shares currently have a dividend yield of 11.10%.

Dynex Capital, Inc., a mortgage real estate investment trust (REIT), invests in mortgage assets in the United States. The company has a P/E ratio of 7.69.

The average volume for Dynex Capital has been 489,500 shares per day over the past 30 days. Dynex Capital has a market cap of $574.7 million and is part of the real estate industry. Shares are up 11.2% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Dynex Capital as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and attractive valuation levels. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 12.0%. Since the same quarter one year prior, revenues rose by 27.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 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 on the basis of return on equity, DYNEX CAPITAL INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.
  • DYNEX CAPITAL INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, DYNEX CAPITAL INC increased its bottom line by earning $1.36 versus $1.05 in the prior year. For the next year, the market is expecting a contraction of 4.4% in earnings ($1.30 versus $1.36).

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

Eagle Rock Energy Partners

Dividend Yield: 10.10%

Eagle Rock Energy Partners (NASDAQ: EROC) shares currently have a dividend yield of 10.10%.

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 597,400 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 1% 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 10.6%. 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.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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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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