4 Hold-Rated Dividend Stocks: NPD, STON, PFLT, HRZN

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."

China Nepstar Chain Drugstore

Dividend Yield: 16.40%

China Nepstar Chain Drugstore (NYSE: NPD) shares currently have a dividend yield of 16.40%.

China Nepstar Chain Drugstore Ltd., through its subsidiaries, owns and operates a retail drugstore chain that sells a range of pharmaceutical and other healthcare products in the People's Republic of China. The company has a P/E ratio of 27.86.

The average volume for China Nepstar Chain Drugstore has been 91,000 shares per day over the past 30 days. China Nepstar Chain Drugstore has a market cap of $192.5 million and is part of the retail industry. Shares are up 36.2% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates China Nepstar Chain Drugstore 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 stock price during the past year. 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 5.7%. Since the same quarter one year prior, revenues rose by 10.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • NPD 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 1.24, which illustrates the ability to avoid short-term cash problems.
  • 42.40% is the gross profit margin for CHINA NEPSTAR CHAIN DRUG-ADS which we consider to be strong. Regardless of NPD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.67% trails the industry average.
  • 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. In comparison to the other companies in the Food & Staples Retailing industry and the overall market, CHINA NEPSTAR CHAIN DRUG-ADS's return on equity is significantly below that of the industry average and is below that of 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 Food & Staples Retailing industry. The net income has significantly decreased by 358.2% when compared to the same quarter one year ago, falling from $0.29 million to -$0.76 million.

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Stonemor Partners

Dividend Yield: 9.60%

Stonemor Partners (NYSE: STON) shares currently have a dividend yield of 9.60%.

StoneMor Partners L.P., together with its subsidiaries, engages in the ownership and operation of cemeteries in the United States. It operates through Cemetery Operations Southeast, Cemetery Operations Northeast, Cemetery Operations West, and Funeral Homes segments.

The average volume for Stonemor Partners has been 61,200 shares per day over the past 30 days. Stonemor Partners has a market cap of $534.6 million and is part of the diversified services industry. Shares are up 20.1% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Stonemor Partners as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and increase in stock price during the past year. However, as a counter to these strengths, 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 increased to $20.41 million or 22.95% when compared to the same quarter last year. In addition, STONEMOR PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -37.68%.
  • 49.84% is the gross profit margin for STONEMOR PARTNERS LP which we consider to be strong. Regardless of STON's high profit margin, it has managed to decrease from the same period last year.
  • 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 Diversified Consumer Services industry and the overall market, STONEMOR PARTNERS LP'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 when compared to that of the S&P 500 and the Diversified Consumer Services industry. The net income has significantly decreased by 239.9% when compared to the same quarter one year ago, falling from $1.06 million to -$1.48 million.

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PennantPark Floating Rate Capital

Dividend Yield: 7.90%

PennantPark Floating Rate Capital (NASDAQ: PFLT) shares currently have a dividend yield of 7.90%.

PennantPark Floating Rate Capital Ltd. is a business development company. It seeks to make secondary direct, debt, equity, and loan investments. The fund seeks to invest through floating rate loans in private or thinly traded or small market-cap, public middle market companies. The company has a P/E ratio of 12.47.

The average volume for PennantPark Floating Rate Capital has been 85,000 shares per day over the past 30 days. PennantPark Floating Rate Capital has a market cap of $204.4 million and is part of the financial services industry. Shares are up 9.7% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates PennantPark Floating Rate Capital as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and increase in net income. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • PFLT's very impressive revenue growth greatly exceeded the industry average of 8.7%. Since the same quarter one year prior, revenues leaped by 74.8%. 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 gross profit margin for PENNANTPARK FLOATING RT CAP is rather high; currently it is at 65.94%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 89.36% significantly outperformed against the industry average.
  • 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. 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.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Capital Markets industry and the overall market, PENNANTPARK FLOATING RT CAP's return on equity is below that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$77.29 million or 308.08% 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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Horizon Technology Finance

Dividend Yield: 9.90%

Horizon Technology Finance (NASDAQ: HRZN) shares currently have a dividend yield of 9.90%.

Horizon Technology Finance Corporation, a specialty finance company, lends to and invests in development-stage companies in the United States. The company has a P/E ratio of 11.46.

The average volume for Horizon Technology Finance has been 40,800 shares per day over the past 30 days. Horizon Technology Finance has a market cap of $134.1 million and is part of the financial services industry. Shares are down 6.3% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Horizon Technology Finance as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 8.7%. Since the same quarter one year prior, revenues rose by 31.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for HORIZON TECHNOLOGY FINANCE is rather high; currently it is at 65.15%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 44.62% significantly outperformed against the industry average.
  • Net operating cash flow has slightly increased to -$16.25 million or 7.16% when compared to the same quarter last year. Despite an increase in cash flow of 7.16%, HORIZON TECHNOLOGY FINANCE is still growing at a significantly lower rate than the industry average of 269.01%.
  • 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 Capital Markets industry and the overall market on the basis of return on equity, HORIZON TECHNOLOGY FINANCE underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • In its most recent trading session, HRZN 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, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

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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