Hold-Rated Dividend Stocks: Top 3 Companies: PBT, HGT, BKCC

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 3 stocks with substantial yields, that ultimately, we have rated "Hold."

Permian Basin Royalty

Dividend Yield: 8.10%

Permian Basin Royalty (NYSE: PBT) shares currently have a dividend yield of 8.10%.

Permian Basin Royalty Trust owns overriding royalty interests in various oil and gas properties in the United States. The company has a P/E ratio of 17.50.

The average volume for Permian Basin Royalty has been 100,700 shares per day over the past 30 days. Permian Basin Royalty has a market cap of $619.9 million and is part of the energy industry. Shares are up 8.5% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Permian Basin Royalty 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, expanding profit margins and notable return on equity. 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 a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • PBT 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 1.22, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for PERMIAN BASIN ROYALTY TRUST is currently very high, coming in at 100.00%. PBT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, PBT's net profit margin of 95.21% significantly outperformed against the industry.
  • PBT, with its decline in revenue, underperformed when compared the industry average of 10.1%. Since the same quarter one year prior, revenues fell by 30.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 28.83%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 32.35% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • PERMIAN BASIN ROYALTY TRUST'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 two years. During the past fiscal year, PERMIAN BASIN ROYALTY TRUST reported lower earnings of $1.16 versus $1.36 in the prior year.

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

Hugoton Royalty

Dividend Yield: 12.60%

Hugoton Royalty (NYSE: HGT) shares currently have a dividend yield of 12.60%.

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 14.85.

The average volume for Hugoton Royalty has been 120,900 shares per day over the past 30 days. Hugoton Royalty has a market cap of $314.8 million and is part of the energy industry. Shares are up 14.1% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Hugoton Royalty as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and increase in net income. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 10.1%. Since the same quarter one year prior, revenues rose by 35.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 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.
  • 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.
  • HUGOTON ROYALTY TRUST has improved earnings per share by 43.8% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, HUGOTON ROYALTY TRUST reported lower earnings of $0.58 versus $1.40 in the prior year.
  • 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 on the basis of return on equity, HUGOTON ROYALTY TRUST has underperformed in comparison with the industry average, but has exceeded 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.

BlackRock Kelso Capital Corporation

Dividend Yield: 10.40%

BlackRock Kelso Capital Corporation (NASDAQ: BKCC) shares currently have a dividend yield of 10.40%.

BlackRock Kelso Capital Corporation is a private equity firm specializing in investments in middle market companies. The firm invests in all industries. The company has a P/E ratio of 13.11.

The average volume for BlackRock Kelso Capital Corporation has been 548,500 shares per day over the past 30 days. BlackRock Kelso Capital Corporation has a market cap of $739.4 million and is part of the financial services industry. Shares are down 1% year to date as of the close of trading on Thursday.

TheStreet Ratings rates BlackRock Kelso Capital Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, 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:
  • BKCC's revenue growth trails the industry average of 12.5%. Since the same quarter one year prior, revenues slightly increased by 1.9%. 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.
  • 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 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 Capital Markets industry. The net income has significantly decreased by 42.7% when compared to the same quarter one year ago, falling from $20.98 million to $12.02 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. When compared to other companies in the Capital Markets industry and the overall market, BLACKROCK KELSO CAPITAL CORP's return on equity is below 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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