4 Hold-Rated Dividend Stocks: KFN, RNO, DSWL, EROC

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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."

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 5.78.

The average volume for KKR Financial Holdings has been 836,100 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 0.7% year to date as of the close of trading on Monday.

TheStreet Ratings rates KKR Financial Holdings as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.2%. Since the same quarter one year prior, revenues slightly increased by 4.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • The gross profit margin for KKR FINANCIAL HOLDINGS LLC is currently very high, coming in at 80.41%. Regardless of KFN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, KFN's net profit margin of 51.39% significantly outperformed against the industry.
  • 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 21.0% when compared to the same quarter one year prior, going from $71.21 million to $86.13 million.
  • 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. Compared to other companies in the Diversified Financial Services industry and the overall market on the basis of return on equity, KKR FINANCIAL HOLDINGS LLC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • The debt-to-equity ratio is very high at 2.41 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.

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

Rhino Resource Partners

Dividend Yield: 14.00%

Rhino Resource Partners (NYSE: RNO) shares currently have a dividend yield of 14.00%.

Rhino Resource Partners LP, together with its subsidiaries, produces, processes, and sells various grades of steam and metallurgical coal from surface and underground mines in the United States. The company has a P/E ratio of 15.14.

The average volume for Rhino Resource Partners has been 41,000 shares per day over the past 30 days. Rhino Resource Partners has a market cap of $195.6 million and is part of the metals & mining industry. Shares are down 6.9% year to date as of the close of trading on Monday.

TheStreet Ratings rates Rhino Resource Partners as a hold. Among the primary strengths of the company is its reasonable valuation levels, considering its current price compared to earnings, book value and other measures. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • RNO, with its decline in revenue, underperformed when compared the industry average of 10.2%. Since the same quarter one year prior, revenues fell by 25.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Despite currently having a low debt-to-equity ratio of 0.52, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that RNO's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.60 is low and demonstrates weak liquidity.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 54.6% when compared to the same quarter one year ago, falling from $13.00 million to $5.90 million.
  • 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, RHINO RESOURCE PARTNERS LP's return on equity is significantly below that of the industry average and is below that of 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.

Deswell Industries

Dividend Yield: 7.80%

Deswell Industries (NASDAQ: DSWL) shares currently have a dividend yield of 7.80%.

Deswell Industries, Inc. engages in the manufacture and sale of injection-molded plastic parts and components, electronic products and subassemblies, and metallic molds and accessory parts for original equipment manufacturers and contract manufacturers.

The average volume for Deswell Industries has been 13,500 shares per day over the past 30 days. Deswell Industries has a market cap of $41.4 million and is part of the consumer non-durables industry. Shares are up 5.4% year to date as of the close of trading on Friday.

TheStreet Ratings rates Deswell Industries 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 good cash flow from operations. 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:
  • DSWL 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 this, the company maintains a quick ratio of 5.18, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has slightly increased to $2.21 million or 8.03% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -11.18%.
  • DSWL, with its decline in revenue, underperformed when compared the industry average of 2.9%. Since the same quarter one year prior, revenues fell by 22.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • 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. Compared to other companies in the Chemicals industry and the overall market, DESWELL INDUSTRIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for DESWELL INDUSTRIES INC is currently extremely low, coming in at 13.91%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -21.00% is significantly below that of 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.

Eagle Rock Energy Partners

Dividend Yield: 12.90%

Eagle Rock Energy Partners (NASDAQ: EROC) shares currently have a dividend yield of 12.90%.

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 741,600 shares per day over the past 30 days. Eagle Rock Energy Partners has a market cap of $1.1 billion and is part of the energy industry. Shares are down 21.4% year to date as of the close of trading on Monday.

TheStreet Ratings rates Eagle Rock Energy Partners as a hold. Among the primary strengths of the company is its revenue growth. At the same time, however, 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 10.2%. Since the same quarter one year prior, revenues rose by 13.4%. 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.
  • EAGLE ROCK ENERGY PARTNRS LP 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, 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 (-$0.03 versus -$1.11).
  • The share price of EAGLE ROCK ENERGY PARTNRS LP has not done very well: it is down 22.24% 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.
  • 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.
  • The gross profit margin for EAGLE ROCK ENERGY PARTNRS LP is rather low; currently it is at 16.57%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 5.00% trails that of 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.

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