What To Hold: Top 4 Hold-Rated Dividend Stocks: PBT, NYMT, QRE, DX

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."

Permian Basin Royalty

Dividend Yield: 7.80%

Permian Basin Royalty (NYSE: PBT) shares currently have a dividend yield of 7.80%.

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 18.20.

The average volume for Permian Basin Royalty has been 94,900 shares per day over the past 30 days. Permian Basin Royalty has a market cap of $644.6 million and is part of the energy industry. Shares are up 12.8% year to date as of the close of trading on Monday.

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 6.4%. 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.
  • The share price of PERMIAN BASIN ROYALTY TRUST has not done very well: it is down 10.87% 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. 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.
  • 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.

New York Mortgage

Dividend Yield: 16.30%

New York Mortgage (NASDAQ: NYMT) shares currently have a dividend yield of 16.30%.

New York Mortgage Trust, Inc., a real estate investment trust (REIT), engages in acquiring, investing in, financing, and managing mortgage-related and financial assets in the United States. The company has a P/E ratio of 8.09.

The average volume for New York Mortgage has been 988,100 shares per day over the past 30 days. New York Mortgage has a market cap of $422.7 million and is part of the real estate industry. Shares are up 4.9% year to date as of the close of trading on Monday.

TheStreet Ratings rates New York Mortgage as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including poor profit margins, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • NYMT's very impressive revenue growth greatly exceeded the industry average of 10.8%. Since the same quarter one year prior, revenues leaped by 162.8%. 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.
  • 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 on the basis of return on equity, NEW YORK MORTGAGE TRUST INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The share price of NEW YORK MORTGAGE TRUST INC has not done very well: it is down 11.46% 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. 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.
  • The gross profit margin for NEW YORK MORTGAGE TRUST INC is rather low; currently it is at 20.46%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 16.60% significantly trails 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.

QR Energy

Dividend Yield: 12.10%

QR Energy (NYSE: QRE) shares currently have a dividend yield of 12.10%.

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 377,100 shares per day over the past 30 days. QR Energy has a market cap of $942.9 million and is part of the energy industry. Shares are down 2.9% year to date as of the close of trading on Monday.

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 6.4%. 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.

Dynex Capital

Dividend Yield: 12.40%

Dynex Capital (NYSE: DX) shares currently have a dividend yield of 12.40%.

Dynex Capital, Inc., a mortgage real estate investment trust (REIT), invests in mortgage assets in the United States. The company has a P/E ratio of 5.63.

The average volume for Dynex Capital has been 472,100 shares per day over the past 30 days. Dynex Capital has a market cap of $481.1 million and is part of the real estate industry. Shares are down 7.6% year to date as of the close of trading on Monday.

TheStreet Ratings rates Dynex Capital 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 had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • DX's revenue growth has slightly outpaced the industry average of 10.8%. Since the same quarter one year prior, revenues rose by 20.6%. 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, DYNEX CAPITAL INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for DYNEX CAPITAL INC is currently very high, coming in at 89.46%. Regardless of DX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DX's net profit margin of 87.53% significantly outperformed against the industry.
  • DYNEX CAPITAL INC 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, DYNEX CAPITAL INC increased its bottom line by earning $1.36 versus $1.05 in the prior year. For the next year, the market is expecting a contraction of 12.5% in earnings ($1.19 versus $1.36).
  • DX has underperformed the S&P 500 Index, declining 18.25% 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.

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