4 Hold-Rated Dividend Stocks: PMT, AGNC, POM, HTA

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."

PennyMac Mortgage Investment

Dividend Yield: 10.30%

PennyMac Mortgage Investment (NYSE: PMT) shares currently have a dividend yield of 10.30%.

PennyMac Mortgage Investment Trust, a specialty finance company, through its subsidiaries, invests primarily in residential mortgage loans and mortgage-related assets. The company operates in two segments, Correspondent Lending and Investment Activities. The company has a P/E ratio of 7.06.

The average volume for PennyMac Mortgage Investment has been 726,700 shares per day over the past 30 days. PennyMac Mortgage Investment has a market cap of $1.6 billion and is part of the real estate industry. Shares are down 12.3% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates PennyMac Mortgage Investment 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 unimpressive growth in net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.5%. Since the same quarter one year prior, revenues slightly increased by 6.4%. 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, PENNYMAC MORTGAGE INVEST TR has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The share price of PENNYMAC MORTGAGE INVEST TR has not done very well: it is down 8.23% 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 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 Real Estate Investment Trusts (REITs) industry. The net income has decreased by 1.7% when compared to the same quarter one year ago, dropping from $40.38 million to $39.70 million.

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

American Capital Agency

Dividend Yield: 15.80%

American Capital Agency (NASDAQ: AGNC) shares currently have a dividend yield of 15.80%.

American Capital Agency Corp. operates as a real estate investment trust (REIT). The company has a P/E ratio of 3.30.

The average volume for American Capital Agency has been 7,445,700 shares per day over the past 30 days. American Capital Agency has a market cap of $7.6 billion and is part of the real estate industry. Shares are down 31.4% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates American Capital Agency as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, reasonable valuation levels 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, unimpressive growth in net income and weak operating cash flow.

Highlights from the ratings report include:
  • 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. In comparison to the other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN CAPITAL AGENCY CORP's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • AGNC, with its very weak revenue results, has greatly underperformed against the industry average of 9.5%. Since the same quarter one year prior, revenues plummeted by 124.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 915.1% when compared to the same quarter one year ago, falling from $86.00 million to -$701.00 million.
  • Net operating cash flow has decreased to $472.00 million or 20.93% 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.

Pepco Holdings

Dividend Yield: 5.80%

Pepco Holdings (NYSE: POM) shares currently have a dividend yield of 5.80%.

Pepco Holdings, Inc., through its subsidiaries, engages in the transmission, distribution, and supply of electricity. The company also distributes and supplies natural gas. The company has a P/E ratio of 28.85.

The average volume for Pepco Holdings has been 1,959,700 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 4.4% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Pepco Holdings as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, growth in earnings per share and increase in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and generally higher debt management risk.

Highlights from the ratings report include:
  • Net operating cash flow has slightly increased to $302.00 million or 2.37% when compared to the same quarter last year. In addition, PEPCO HOLDINGS INC has also modestly surpassed the industry average cash flow growth rate of 0.99%.
  • PEPCO HOLDINGS INC has improved earnings per share by 15.8% 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, PEPCO HOLDINGS INC reported lower earnings of $0.98 versus $1.14 in the prior year. This year, the market expects an improvement in earnings ($1.12 versus $0.98).
  • POM, with its decline in revenue, slightly underperformed the industry average of 1.8%. Since the same quarter one year prior, revenues slightly dropped by 3.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 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 Electric Utilities industry and the overall market on the basis of return on equity, PEPCO HOLDINGS INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • In its most recent trading session, POM 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, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

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

Healthcare Trust of America

Dividend Yield: 5.70%

Healthcare Trust of America (NYSE: HTA) shares currently have a dividend yield of 5.70%.

Healthcare Trust of America is a fully integrated, self-administered and internally managed real estate investment trust, or REIT. The company acquires, owns and operates medical office buildings and other facilities that serve the healthcare industry. The company has a P/E ratio of 125.75.

The average volume for Healthcare Trust of America has been 1,385,900 shares per day over the past 30 days. Healthcare Trust of America has a market cap of $1.8 billion and is part of the real estate industry. Shares are up 1.6% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Healthcare Trust of America as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth 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 poor profit margins.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 263.4% when compared to the same quarter one year prior, rising from -$2.95 million to $4.82 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.5%. Since the same quarter one year prior, revenues slightly increased by 6.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • HEALTHCARE TRUST OF AMERICA reported significant earnings per share improvement 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, HEALTHCARE TRUST OF AMERICA reported poor results of -$0.10 versus $0.00 in the prior year. This year, the market expects an improvement in earnings ($0.14 versus -$0.10).
  • The gross profit margin for HEALTHCARE TRUST OF AMERICA is rather low; currently it is at 24.00%. Regardless of HTA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, HTA's net profit margin of 5.84% is significantly lower than the industry average.
  • In its most recent trading session, HTA 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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