What To Hold: Top 4 Hold-Rated Dividend Stocks: MCGC, NSH, PGH, SJT

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."

MCG Capital Corporation

Dividend Yield: 10.80%

MCG Capital Corporation (NASDAQ: MCGC) shares currently have a dividend yield of 10.80%.

MCG Capital Corporation is a private equity firm specializing in investments in middle market companies. The firm does not prefer investments in highly cyclical and volatile industry sectors and businesses with significant volatility exposure. It seeks to invest in small to mid sized companies. The company has a P/E ratio of 12.57.

The average volume for MCG Capital Corporation has been 286,600 shares per day over the past 30 days. MCG Capital Corporation has a market cap of $331.1 million and is part of the financial services industry. Shares are up 1.3% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates MCG Capital Corporation 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 find that the growth in the company's net income has been quite unimpressive.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 8.6%. Since the same quarter one year prior, revenues slightly increased by 9.1%. 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 MCG CAPITAL CORP is currently very high, coming in at 80.80%. It has increased significantly from the same period last year. Along with this, the net profit margin of 24.97% is above that of the industry average.
  • Net operating cash flow has significantly increased by 272.20% to $63.01 million when compared to the same quarter last year. Despite an increase in cash flow, MCG CAPITAL CORP's average is still marginally south of the industry average growth rate of 273.40%.
  • 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. When compared to other companies in the Capital Markets industry and the overall market, MCG CAPITAL CORP's return on equity is below 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 when compared to that of the S&P 500 and the Capital Markets industry. The net income has decreased by 22.9% when compared to the same quarter one year ago, dropping from $4.27 million to $3.29 million.

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NuStar GP Holdings

Dividend Yield: 7.20%

NuStar GP Holdings (NYSE: NSH) shares currently have a dividend yield of 7.20%.

NuStar GP Holdings, LLC owns general partner and limited partner interests in NuStar Energy L.P. that engages in the terminalling and storage of petroleum products, transportation of petroleum products and anhydrous ammonia, and petroleum refining and marketing. The company has a P/E ratio of 31.58.

The average volume for NuStar GP Holdings has been 346,900 shares per day over the past 30 days. NuStar GP Holdings has a market cap of $1.3 billion and is part of the energy industry. Shares are up 4% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates NuStar GP Holdings as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 5.4%. Since the same quarter one year prior, revenues rose by 46.6%. 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 NUSTAR GP HOLDINGS LLC is currently very high, coming in at 100.00%. NSH has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, NSH's net profit margin of 89.39% significantly outperformed against the industry.
  • NSH's debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that NSH's debt-to-equity ratio is low, the quick ratio, which is currently 0.52, displays a potential problem in covering short-term cash needs.
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 37.2% when compared to the same quarter one year ago, falling from $19.17 million to $12.04 million.
  • Net operating cash flow has significantly decreased to $4.20 million or 55.65% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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Pengrowth Energy

Dividend Yield: 7.30%

Pengrowth Energy (NYSE: PGH) shares currently have a dividend yield of 7.30%.

Pengrowth Energy Corporation engages in the acquisition, exploration, development, and production of oil and natural gas reserves in Canada.

The average volume for Pengrowth Energy has been 1,414,000 shares per day over the past 30 days. Pengrowth Energy has a market cap of $3.3 billion and is part of the energy industry. Shares are up 26.4% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Pengrowth Energy as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and expanding profit margins. 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:
  • The revenue growth came in higher than the industry average of 5.4%. Since the same quarter one year prior, revenues rose by 16.1%. 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 $160.47 million or 11.72% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 1.02%.
  • 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. 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.
  • PENGROWTH ENERGY CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, PENGROWTH ENERGY CORP reported lower earnings of $0.04 versus $0.26 in the prior year.
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 351.0% when compared to the same quarter one year ago, falling from -$23.79 million to -$107.30 million.

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

San Juan Basin Royalty

Dividend Yield: 7.70%

San Juan Basin Royalty (NYSE: SJT) shares currently have a dividend yield of 7.70%.

San Juan Basin Royalty Trust operates as an express trust. The company has a 75% net overriding royalty interest carved out of Burlington's oil and gas leasehold interests (the underlying properties) in properties located in the San Juan Basin in northwestern New Mexico. The company has a P/E ratio of 30.57.

The average volume for San Juan Basin Royalty has been 130,200 shares per day over the past 30 days. San Juan Basin Royalty has a market cap of $797.9 million and is part of the energy industry. Shares are up 27.7% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates San Juan Basin 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 stock itself is trading at a premium valuation.

Highlights from the ratings report include:
  • SJT's very impressive revenue growth greatly exceeded the industry average of 5.4%. Since the same quarter one year prior, revenues leaped by 179.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SJT 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 this, the company maintains a quick ratio of 3.48, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for SAN JUAN BASIN ROYALTY TR is currently very high, coming in at 100.00%. SJT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, SJT's net profit margin of 97.90% significantly outperformed against the industry.
  • 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, SAN JUAN BASIN ROYALTY TR's return on equity significantly exceeds 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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