Hold-Rated Dividend Stocks In The Top 5: KFN, NKA, BKCC, QRE, GOOD

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."

KKR Financial Holdings

Dividend Yield: 8.30%

KKR Financial Holdings (NYSE: KFN) shares currently have a dividend yield of 8.30%.

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 5.50.

The average volume for KKR Financial Holdings has been 821,500 shares per day over the past 30 days. KKR Financial Holdings has a market cap of $2.1 billion and is part of the real estate industry. Shares are down 4.5% year to date as of the close of trading on Tuesday.

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, weak operating cash flow 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.
  • Net operating cash flow has declined marginally to $29.71 million or 6.51% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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.

Niska Gas Storage Partners

Dividend Yield: 9.90%

Niska Gas Storage Partners (NYSE: NKA) shares currently have a dividend yield of 9.90%.

Niska Gas Storage Partners LLC owns and operates natural gas storage assets in North America. The company has a P/E ratio of 101.07.

The average volume for Niska Gas Storage Partners has been 76,200 shares per day over the past 30 days. Niska Gas Storage Partners has a market cap of $488.1 million and is part of the utilities industry. Shares are up 31.4% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Niska Gas Storage Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.

Highlights from the ratings report include:
  • NKA's very impressive revenue growth greatly exceeded the industry average of 6.6%. Since the same quarter one year prior, revenues leaped by 193.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • NISKA GAS STORAGE PARTNERS reported significant earnings per share improvement 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, NISKA GAS STORAGE PARTNERS continued to lose money by earning -$0.63 versus -$2.38 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus -$0.63).
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, NISKA GAS STORAGE PARTNERS's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio of 1.13 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, NKA has a quick ratio of 0.52, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

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: 10.60%

BlackRock Kelso Capital Corporation (NASDAQ: BKCC) shares currently have a dividend yield of 10.60%.

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 12.89.

The average volume for BlackRock Kelso Capital Corporation has been 516,000 shares per day over the past 30 days. BlackRock Kelso Capital Corporation has a market cap of $727.6 million and is part of the financial services industry. Shares are down 2.6% year to date as of the close of trading on Tuesday.

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 12.7%. 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.
  • The gross profit margin for BLACKROCK KELSO CAPITAL CORP is currently very high, coming in at 73.70%. Regardless of BKCC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BKCC's net profit margin of 33.27% significantly outperformed against the industry.
  • 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.

QR Energy

Dividend Yield: 11.80%

QR Energy (NYSE: QRE) shares currently have a dividend yield of 11.80%.

QR Energy, LP, through its subsidiary, QRE Operating, LLC, engages in the acquisition, exploitation, development, and production of oil and natural gas properties in the United States.

The average volume for QR Energy has been 398,200 shares per day over the past 30 days. QR Energy has a market cap of $964.0 million and is part of the energy industry. Shares are down 1.2% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates QR 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 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 6.6%. Since the same quarter one year prior, revenues rose by 18.0%. 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.
  • The gross profit margin for QR ENERGY LP is rather high; currently it is at 59.70%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 60.33% significantly outperformed against the industry average.
  • QR ENERGY LP's earnings per share declined by 49.7% 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, QR ENERGY LP increased its bottom line by earning $0.54 versus $0.35 in the prior year. This year, the market expects an improvement in earnings ($1.19 versus $0.54).
  • The debt-to-equity ratio of 1.11 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, QRE maintains a poor quick ratio of 0.95, which illustrates the inability to avoid short-term cash problems.
  • 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, QR ENERGY 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.

Gladstone Commercial Corporation

Dividend Yield: 8.50%

Gladstone Commercial Corporation (NASDAQ: GOOD) shares currently have a dividend yield of 8.50%.

Gladstone Commercial Corporation operates as a real estate investment trust (REIT) in the United States. It engages in investing in and owning net leased industrial and commercial real properties, and making long-term industrial and commercial mortgage loans.

The average volume for Gladstone Commercial Corporation has been 74,900 shares per day over the past 30 days. Gladstone Commercial Corporation has a market cap of $251.5 million and is part of the real estate industry. Shares are down 1.7% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Gladstone Commercial Corporation 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 feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • GOOD's revenue growth has slightly outpaced the industry average of 10.7%. Since the same quarter one year prior, revenues rose by 14.9%. 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.
  • 48.32% is the gross profit margin for GLADSTONE COMMERCIAL CORP which we consider to be strong. Regardless of GOOD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GOOD's net profit margin of 3.15% is significantly lower than the industry average.
  • In its most recent trading session, GOOD 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. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, GLADSTONE COMMERCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $4.49 million or 12.74% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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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