Best Of The Hold-Rated Dividend Stocks: Top 4 Companies: SIR, LINE, POM, BBEP

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."

Select Income REIT

Dividend Yield: 7.20%

Select Income REIT (NYSE: SIR) shares currently have a dividend yield of 7.20%.

Select Income REIT is a real estate investment trust managed by Reit Management & Research LLC. The firm invests in the real estate markets of United States with a focus on Hawaii. The fund seeks to invest in office and industrial properties. Select Income REIT is domiciled in United States. The company has a P/E ratio of 11.69.

The average volume for Select Income REIT has been 511,300 shares per day over the past 30 days. Select Income REIT has a market cap of $1.2 billion and is part of the real estate industry. Shares are down 0.9% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Select Income REIT as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and attractive valuation levels. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • SIR's very impressive revenue growth greatly exceeded the industry average of 10.8%. Since the same quarter one year prior, revenues leaped by 64.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • SELECT INCOME REIT has improved earnings per share by 18.4% 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, SELECT INCOME REIT increased its bottom line by earning $2.10 versus $0.57 in the prior year. This year, the market expects an improvement in earnings ($2.12 versus $2.10).
  • When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, SELECT INCOME REIT's return on equity is below that of both the industry average and the S&P 500.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income increased by 48.6% when compared to the same quarter one year prior, rising from $15.33 million to $22.79 million.
  • In its most recent trading session, SIR 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.

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

Linn Energy

Dividend Yield: 12.40%

Linn Energy (NASDAQ: LINE) shares currently have a dividend yield of 12.40%.

Linn Energy, LLC, an independent oil and natural gas company, engages in the acquisition and development of oil and natural gas properties.

The average volume for Linn Energy has been 4,276,500 shares per day over the past 30 days. Linn Energy has a market cap of $5.8 billion and is part of the energy industry. Shares are down 30.3% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Linn Energy as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity 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 slightly increased by 6.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for LINN ENERGY LLC is currently very high, coming in at 83.23%. It has increased significantly from the same period last year. Along with this, the net profit margin of 41.39% significantly outperformed against the industry average.
  • LINN ENERGY LLC has improved earnings per share by 22.7% 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, LINN ENERGY LLC swung to a loss, reporting -$1.86 versus $2.21 in the prior year. This year, the market expects an improvement in earnings ($0.92 versus -$1.86).
  • The debt-to-equity ratio of 1.48 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.44, which clearly demonstrates the inability to cover short-term cash 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, LINN ENERGY LLC'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.

Pepco Holdings

Dividend Yield: 5.70%

Pepco Holdings (NYSE: POM) shares currently have a dividend yield of 5.70%.

Pepco Holdings, Inc., through its subsidiaries, engages in the transmission, distribution, and supply of electricity. The company also distributes and supplies natural gas.

The average volume for Pepco Holdings has been 2,324,400 shares per day over the past 30 days. Pepco Holdings has a market cap of $4.7 billion and is part of the utilities industry. Shares are down 3.2% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Pepco Holdings as a hold. Among the primary strengths of the company is its generally strong cash flow from operations. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and generally higher debt management risk.

Highlights from the ratings report include:
  • Net operating cash flow has slightly increased to $111.00 million or 9.90% when compared to the same quarter last year. Despite an increase in cash flow, PEPCO HOLDINGS INC's average is still marginally south of the industry average growth rate of 17.83%.
  • POM, with its decline in revenue, underperformed when compared the industry average of 15.9%. Since the same quarter one year prior, revenues slightly dropped by 1.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • PEPCO HOLDINGS INC's earnings per share declined by 30.4% 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, PEPCO HOLDINGS INC increased its bottom line by earning $1.17 versus $1.14 in the prior year. For the next year, the market is expecting a contraction of 4.3% in earnings ($1.12 versus $1.17).
  • 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 Electric Utilities industry and the overall market, PEPCO HOLDINGS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • 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 Electric Utilities industry. The net income has significantly decreased by 32.3% when compared to the same quarter one year ago, falling from $62.00 million to $42.00 million.

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

BreitBurn Energy Partners

Dividend Yield: 10.80%

BreitBurn Energy Partners (NASDAQ: BBEP) shares currently have a dividend yield of 10.80%.

BreitBurn Energy Partners L.P. engages in the acquisition, exploitation, and development of oil and gas properties in the United States.

The average volume for BreitBurn Energy Partners has been 1,043,100 shares per day over the past 30 days. BreitBurn Energy Partners has a market cap of $1.8 billion and is part of the energy industry. Shares are down 4.1% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates BreitBurn 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 expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, generally higher debt management risk 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 slightly increased by 6.8%. 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 $38.57 million or 31.85% 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 BREITBURN ENERGY PARTNERS LP is currently very high, coming in at 71.78%. Regardless of BBEP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BBEP's net profit margin of 35.22% significantly outperformed against the industry.
  • Despite currently having a low debt-to-equity ratio of 0.54, 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 BBEP's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.69 is low and demonstrates weak liquidity.
  • 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, BREITBURN ENERGY PARTNERS 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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