What To Hold: Top 5 Hold-Rated Dividend Stocks: NLY, PMT, TWO, IVR, VNR

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

Annaly Capital Management

Dividend Yield: 14.00%

Annaly Capital Management (NYSE: NLY) shares currently have a dividend yield of 14.00%.

Annaly Capital Management, Inc. owns, manages, and finances a portfolio of real estate related investments in United States. The company has a P/E ratio of 3.32.

The average volume for Annaly Capital Management has been 13,894,200 shares per day over the past 30 days. Annaly Capital Management has a market cap of $10.8 billion and is part of the real estate industry. Shares are down 18.7% year to date as of the close of trading on Monday.

TheStreet Ratings rates Annaly Capital Management as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 1897.1% when compared to the same quarter one year prior, rising from -$91.16 million to $1,638.21 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ANNALY CAPITAL MANAGEMENT's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • NLY, with its decline in revenue, underperformed when compared the industry average of 10.8%. Since the same quarter one year prior, revenues slightly dropped by 7.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • NLY's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 35.31%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • Net operating cash flow has significantly decreased to -$3,820.86 million or 192.63% 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.

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 6.36.

The average volume for PennyMac Mortgage Investment has been 1,146,300 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 Monday.

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 the stock has experienced relatively poor performance when compared with the S&P 500 during the past year.

Highlights from the ratings report include:
  • PMT's very impressive revenue growth greatly exceeded the industry average of 10.8%. Since the same quarter one year prior, revenues leaped by 101.4%. 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, 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 68.09%. 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 42.01% significantly outperformed against the industry.
  • In its most recent trading session, PMT has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.

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

Two Harbors Investment

Dividend Yield: 12.80%

Two Harbors Investment (NYSE: TWO) shares currently have a dividend yield of 12.80%.

Two Harbors Investment Corp. operates as a real estate investment trust (REIT) that focuses on investing in, financing, and managing residential mortgage-backed securities (RMBS), residential mortgage loans, and other financial assets. The company has a P/E ratio of 4.08.

The average volume for Two Harbors Investment has been 6,952,100 shares per day over the past 30 days. Two Harbors Investment has a market cap of $3.5 billion and is part of the real estate industry. Shares are down 12.8% year to date as of the close of trading on Monday.

TheStreet Ratings rates Two Harbors 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 also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • TWO's very impressive revenue growth greatly exceeded the industry average of 10.8%. Since the same quarter one year prior, revenues leaped by 133.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, TWO HARBORS INVESTMENT CORP's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • TWO has underperformed the S&P 500 Index, declining 16.69% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Net operating cash flow has significantly decreased to -$663.79 million or 1457.41% 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.

Invesco Mortgage Capital

Dividend Yield: 16.80%

Invesco Mortgage Capital (NYSE: IVR) shares currently have a dividend yield of 16.80%.

Invesco Mortgage Capital Inc., a real estate investment trust (REIT), focuses on investing in, financing, and managing residential and commercial mortgage-backed securities and mortgage loans. It invests in residential mortgage-backed securities for which a U.S. The company has a P/E ratio of 4.98.

The average volume for Invesco Mortgage Capital has been 2,128,500 shares per day over the past 30 days. Invesco Mortgage Capital has a market cap of $2.1 billion and is part of the real estate industry. Shares are down 21.6% year to date as of the close of trading on Monday.

TheStreet Ratings rates Invesco Mortgage Capital as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.8%. Since the same quarter one year prior, revenues rose by 26.2%. 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, INVESCO MORTGAGE CAPITAL INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for INVESCO MORTGAGE CAPITAL INC is currently very high, coming in at 91.84%. Regardless of IVR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, IVR's net profit margin of 79.59% significantly outperformed against the industry.
  • INVESCO MORTGAGE CAPITAL INC has improved earnings per share by 39.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, INVESCO MORTGAGE CAPITAL INC reported lower earnings of $2.89 versus $3.45 in the prior year. For the next year, the market is expecting a contraction of 19.2% in earnings ($2.34 versus $2.89).
  • IVR has underperformed the S&P 500 Index, declining 24.89% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.

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: 9.10%

Vanguard Natural Resources (NASDAQ: VNR) shares currently have a dividend yield of 9.10%.

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 610,000 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 5.9% year to date as of the close of trading on Monday.

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 expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, deteriorating net income and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 15.4%. 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.
  • Net operating cash flow has increased to $60.71 million or 17.92% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -17.92%.
  • The gross profit margin for VANGUARD NATURAL RESOURCES is currently very high, coming in at 79.20%. Regardless of VNR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VNR's net profit margin of 46.36% significantly outperformed against the industry.
  • In its most recent trading session, VNR has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • 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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