4 Hold-Rated Dividend Stocks: MCGC, EFC, INTX, DSWL

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: 11.00%

MCG Capital Corporation (NASDAQ: MCGC) shares currently have a dividend yield of 11.00%.

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 12.30.

The average volume for MCG Capital Corporation has been 340,600 shares per day over the past 30 days. MCG Capital Corporation has a market cap of $324.0 million and is part of the financial services industry. Shares are up 6.4% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates MCG Capital Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 8.8%. 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.
  • MCG CAPITAL CORP's earnings per share declined by 16.7% 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, MCG CAPITAL CORP turned its bottom line around by earning $0.08 versus -$1.22 in the prior year. This year, the market expects an improvement in earnings ($0.43 versus $0.08).
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, MCGC has underperformed the S&P 500 Index, declining 5.31% 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.
  • 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.

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

Ellington Financial

Dividend Yield: 13.20%

Ellington Financial (NYSE: EFC) shares currently have a dividend yield of 13.20%.

Ellington Financial LLC, a specialty finance company, acquires and manages mortgage-related assets, including residential mortgage backed securities backed by prime jumbo, Alt-A, manufactured housing and subprime residential mortgage loans, and residential mortgage-backed securities. The company has a P/E ratio of 5.99.

The average volume for Ellington Financial has been 132,200 shares per day over the past 30 days. Ellington Financial has a market cap of $592.5 million and is part of the real estate industry. Shares are up 3.6% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Ellington Financial as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • EFC's very impressive revenue growth greatly exceeded the industry average of 8.8%. Since the same quarter one year prior, revenues leaped by 56.0%. 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 ELLINGTON FINANCIAL LLC is currently very high, coming in at 73.47%. It has increased significantly from the same period last year. Along with this, the net profit margin of 48.72% significantly outperformed against the industry average.
  • Net operating cash flow has significantly decreased to -$52.04 million or 130.62% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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 significantly decreased by 60.3% when compared to the same quarter one year ago, falling from $29.54 million to $11.73 million.

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

Intersections

Dividend Yield: 9.50%

Intersections (NASDAQ: INTX) shares currently have a dividend yield of 9.50%.

Intersections Inc. provides consumer identity risk management services in the United States. Its services help consumers understand and monitor their credit profiles and other personal information, and protect themselves against identity theft or fraud. The company has a P/E ratio of 44.37.

The average volume for Intersections has been 90,700 shares per day over the past 30 days. Intersections has a market cap of $152.6 million and is part of the diversified services industry. Shares are up 7.5% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Intersections 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 and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • INTX's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, INTX has a quick ratio of 1.56, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for INTERSECTIONS INC is rather high; currently it is at 64.86%. Regardless of INTX'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 -1.95% trails the industry average.
  • INTERSECTIONS INC 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. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, INTERSECTIONS INC increased its bottom line by earning $1.06 versus $0.97 in the prior year.
  • Net operating cash flow has significantly decreased to $5.23 million or 62.36% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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 Commercial Services & Supplies industry and the overall market, INTERSECTIONS 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.

Deswell Industries

Dividend Yield: 8.00%

Deswell Industries (NASDAQ: DSWL) shares currently have a dividend yield of 8.00%.

Deswell Industries, Inc. engages in the manufacture and sale of injection-molded plastic parts and components, electronic products and subassemblies, and metallic molds and accessory parts for original equipment manufacturers and contract manufacturers.

The average volume for Deswell Industries has been 35,900 shares per day over the past 30 days. Deswell Industries has a market cap of $40.9 million and is part of the consumer non-durables industry. Shares are up 12.5% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Deswell Industries as a hold. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, 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:
  • DSWL 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 3.98, which clearly demonstrates the ability to cover short-term cash needs.
  • The revenue fell significantly faster than the industry average of 7.1%. Since the same quarter one year prior, revenues fell by 27.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The share price of DESWELL INDUSTRIES INC has not done very well: it is down 5.82% 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 DESWELL INDUSTRIES INC is rather low; currently it is at 16.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -10.34% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$0.63 million or 339.86% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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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