3 Hold-Rated Dividend Stocks: PMT, OZM, VNR

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."

PennyMac Mortgage Investment

Dividend Yield: 10.50%

PennyMac Mortgage Investment (NYSE: PMT) shares currently have a dividend yield of 10.50%.

PennyMac Mortgage Investment Trust, a specialty finance company, through its subsidiaries, invests primarily in residential mortgage loans and mortgage-related assets. The company operates in two segments, Correspondent Lending and Investment Activities. The company has a P/E ratio of 6.41.

The average volume for PennyMac Mortgage Investment has been 1,134,100 shares per day over the past 30 days. PennyMac Mortgage Investment has a market cap of $1.3 billion and is part of the real estate industry. Shares are down 14.2% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates PennyMac Mortgage Investment as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and attractive valuation levels. 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:
  • PMT's very impressive revenue growth greatly exceeded the industry average of 12.0%. Since the same quarter one year prior, revenues leaped by 155.2%. Growth in the company's revenue appears to have helped boost 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, PENNYMAC MORTGAGE INVEST TR's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for PENNYMAC MORTGAGE INVEST TR is rather high; currently it is at 60.60%. Regardless of PMT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PMT's net profit margin of 44.76% significantly outperformed against the industry.
  • 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.
  • Net operating cash flow has significantly decreased to -$225.15 million or 498.35% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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

Och-Ziff Capital Management Group

Dividend Yield: 10.20%

Och-Ziff Capital Management Group (NYSE: OZM) shares currently have a dividend yield of 10.20%.

Och-Ziff Capital Management Group LLC is a publicly owned investment manager. The firm provides investment advisory services for its clients. It invests in equity markets across the world. The firm makes its investments in alternative markets across the world.

The average volume for Och-Ziff Capital Management Group has been 1,239,900 shares per day over the past 30 days. Och-Ziff Capital Management Group has a market cap of $1.6 billion and is part of the financial services industry. Shares are up 15.7% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Och-Ziff Capital Management Group as a hold. The company's strengths can be seen in multiple areas, such as its robust 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 profit margins have been poor overall.

Highlights from the ratings report include:
  • OZM's very impressive revenue growth greatly exceeded the industry average of 6.3%. Since the same quarter one year prior, revenues leaped by 91.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 119.54% and other important driving factors, this stock has surged by 50.96% 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.
  • Net operating cash flow has significantly increased by 1922.49% to $581.25 million when compared to the same quarter last year. In addition, OCH-ZIFF CAPITAL MGMT LP has also vastly surpassed the industry average cash flow growth rate of -324.31%.
  • The gross profit margin for OCH-ZIFF CAPITAL MGMT LP is rather high; currently it is at 66.40%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.64% 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.

Vanguard Natural Resources

Dividend Yield: 8.80%

Vanguard Natural Resources (NASDAQ: VNR) shares currently have a dividend yield of 8.80%.

Vanguard Natural Resources, LLC, through its subsidiaries, engages in the acquisition and development of oil and natural gas properties in the United States.

The average volume for Vanguard Natural Resources has been 589,000 shares per day over the past 30 days. Vanguard Natural Resources has a market cap of $2.1 billion and is part of the energy industry. Shares are up 8.2% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Vanguard Natural Resources 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 deteriorating net income, generally higher debt management risk and disappointing return on equity.

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 18.8%. 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 increased to $58.24 million or 26.40% when compared to the same quarter last year. In addition, VANGUARD NATURAL RESOURCES has also vastly surpassed the industry average cash flow growth rate of -25.53%.
  • 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 debt-to-equity ratio of 1.02 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, VNR has a quick ratio of 0.67, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • 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, VANGUARD NATURAL RESOURCES'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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