What To Hold: 5 Hold-Rated Dividend Stocks TWO, PKY, ARCP, BMO, MEMP

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."

Two Harbors Investment

Dividend Yield: 10.90%

Two Harbors Investment (NYSE: TWO) shares currently have a dividend yield of 10.90%.

Two Harbors Investment Corp. operates as a real estate investment trust (REIT) that focuses on investing in, financing, and managing residential mortgage-backed securities (RMBS), residential mortgage loans, and other financial assets. The company has a P/E ratio of 5.70.

The average volume for Two Harbors Investment has been 4,197,400 shares per day over the past 30 days. Two Harbors Investment has a market cap of $3.5 billion and is part of the real estate industry. Shares are up 5.1% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Two Harbors Investment as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins and good cash flow from operations. 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 a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The gross profit margin for TWO HARBORS INVESTMENT CORP is currently very high, coming in at 133.74%. It has increased significantly from the same period last year. Along with this, the net profit margin of 294.88% significantly outperformed against the industry average.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, TWO HARBORS INVESTMENT CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • TWO HARBORS INVESTMENT 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. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, TWO HARBORS INVESTMENT CORP reported lower earnings of $1.11 versus $1.27 in the prior year. For the next year, the market is expecting a contraction of 18.5% in earnings ($0.91 versus $1.11).
  • 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 819.1% when compared to the same quarter one year ago, falling from $26.80 million to -$192.73 million.

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

Parkway Properties

Dividend Yield: 4.20%

Parkway Properties (NYSE: PKY) shares currently have a dividend yield of 4.20%.

Parkway Properties, Inc., a real estate investment trust (REIT), engages in the operation, acquisition, ownership, management, and leasing of office properties. It operates and invests principally in office properties in the southeastern and southwestern United States and Chicago.

The average volume for Parkway Properties has been 623,600 shares per day over the past 30 days. Parkway Properties has a market cap of $1.2 billion and is part of the real estate industry. Shares are down 8% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Parkway Properties 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 increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including 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 9.6%. Since the same quarter one year prior, revenues rose by 32.0%. 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.
  • Net operating cash flow has significantly increased by 79.07% to $34.45 million when compared to the same quarter last year. In addition, PARKWAY PROPERTIES INC has also vastly surpassed the industry average cash flow growth rate of 8.56%.
  • 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.
  • 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 208.3% when compared to the same quarter one year ago, falling from $2.13 million to -$2.31 million.
  • 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, PARKWAY PROPERTIES INC'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.

American Realty Capital Properties Inc Clas

Dividend Yield: 7.40%

American Realty Capital Properties Inc Clas (NASDAQ: ARCP) shares currently have a dividend yield of 7.40%.

American Realty Capital Properties, Inc. owns and acquires single tenant, freestanding commercial real estate that is net leased on a medium-term basis, primarily to investment grade credit rated and other creditworthy tenants. The company principally invests in retail and office properties.

The average volume for American Realty Capital Properties Inc Clas has been 5,433,100 shares per day over the past 30 days. American Realty Capital Properties Inc Clas has a market cap of $2.4 billion and is part of the real estate industry. Shares are up 1.2% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates American Realty Capital Properties Inc Clas 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 notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • ARCP's very impressive revenue growth greatly exceeded the industry average of 9.6%. Since the same quarter one year prior, revenues leaped by 223.6%. 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.
  • Net operating cash flow has significantly increased by 622.25% to $16.29 million when compared to the same quarter last year. In addition, AMERICAN RLTY CAP PPTY INC has also vastly surpassed the industry average cash flow growth rate of 8.56%.
  • The gross profit margin for AMERICAN RLTY CAP PPTY INC is currently extremely low, coming in at 5.92%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, ARCP's net profit margin of -97.00% significantly underperformed when compared to the industry average.
  • 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 365.4% when compared to the same quarter one year ago, falling from -$12.69 million to -$59.06 million.

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

Bank of Montreal

Dividend Yield: 4.30%

Bank of Montreal (NYSE: BMO) shares currently have a dividend yield of 4.30%.

Bank of Montreal provides various retail banking, wealth management, and investment banking products and services in Canada, the United States, and internationally. The company has a P/E ratio of 10.94.

The average volume for Bank of Montreal has been 338,600 shares per day over the past 30 days. Bank of Montreal has a market cap of $42.3 billion and is part of the banking industry. Shares are down 1.8% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Bank of Montreal as a hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • BANK OF MONTREAL's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, BANK OF MONTREAL increased its bottom line by earning $6.25 versus $6.15 in the prior year.
  • The gross profit margin for BANK OF MONTREAL is currently very high, coming in at 83.68%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, BMO's net profit margin of 20.02% significantly trails the industry average.
  • Net operating cash flow has significantly increased by 65.96% to -$4,785.00 million when compared to the same quarter last year. Despite an increase in cash flow of 65.96%, BANK OF MONTREAL is still growing at a significantly lower rate than the industry average of 119.99%.
  • In its most recent trading session, BMO 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. 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.
  • 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 Commercial Banks industry and the overall market on the basis of return on equity, BANK OF MONTREAL has outperformed in comparison with the industry average, but has underperformed when compared to that of 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.

Memorial Production Partners

Dividend Yield: 10.00%

Memorial Production Partners (NASDAQ: MEMP) shares currently have a dividend yield of 10.00%.

Memorial Production Partners LP, through its subsidiary, Memorial Production Operating LLC, engages in the acquisition, development, exploitation, and production of oil and natural gas properties. The company has a P/E ratio of 129.35.

The average volume for Memorial Production Partners has been 560,500 shares per day over the past 30 days. Memorial Production Partners has a market cap of $1.2 billion and is part of the energy industry. Shares are up 0.2% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Memorial Production Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and growth in earnings per share. 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 greatly exceeded the industry average of 5.6%. Since the same quarter one year prior, revenues rose by 38.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has significantly increased by 256.66% to $52.36 million when compared to the same quarter last year. In addition, MEMORIAL PRODUCTION PRTRS LP has also vastly surpassed the industry average cash flow growth rate of 2.81%.
  • MEMORIAL PRODUCTION PRTRS LP has improved earnings per share by 14.2% 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, MEMORIAL PRODUCTION PRTRS LP swung to a loss, reporting -$0.01 versus $0.30 in the prior year. This year, the market expects an improvement in earnings ($1.73 versus -$0.01).
  • The debt-to-equity ratio of 1.15 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.47, which clearly demonstrates the inability to cover short-term cash needs.
  • 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MEMORIAL PRODUCTION PRTRS LP's return on equity is significantly below that of the industry average and is below that of 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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