What To Hold: 5 Hold-Rated Dividend Stocks BKCC, LGCY, APSA, RAS, BPT

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."

BlackRock Kelso Capital Corporation

Dividend Yield: 11.10%

BlackRock Kelso Capital Corporation (NASDAQ: BKCC) shares currently have a dividend yield of 11.10%.

BlackRock Kelso Capital Corporation is a private equity firm specializing in investments in middle market companies. The firm invests in all industries. The company has a P/E ratio of 11.48.

The average volume for BlackRock Kelso Capital Corporation has been 424,900 shares per day over the past 30 days. BlackRock Kelso Capital Corporation has a market cap of $700.1 million and is part of the financial services industry. Shares are up 0.9% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates BlackRock Kelso Capital Corporation as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Capital Markets industry average. The net income increased by 38.5% when compared to the same quarter one year prior, rising from $14.33 million to $19.84 million.
  • BLACKROCK KELSO CAPITAL CORP has improved earnings per share by 36.8% 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, BLACKROCK KELSO CAPITAL CORP reported lower earnings of $0.78 versus $1.06 in the prior year. This year, the market expects an improvement in earnings ($0.82 versus $0.78).
  • BKCC has underperformed the S&P 500 Index, declining 9.72% 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.
  • Net operating cash flow has significantly decreased to -$110.23 million or 247.73% 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.

Legacy Reserves

Dividend Yield: 8.30%

Legacy Reserves (NASDAQ: LGCY) shares currently have a dividend yield of 8.30%.

Legacy Reserves LP, an independent oil and natural gas limited partnership, engages in the acquisition and development of oil and natural gas properties primarily located in the Permian Basin, Mid-Continent, and Rocky Mountain regions of the United States. The company has a P/E ratio of 140.55.

The average volume for Legacy Reserves has been 140,500 shares per day over the past 30 days. Legacy Reserves has a market cap of $1.6 billion and is part of the energy industry. Shares are unchanged year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Legacy Reserves as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • LGCY's very impressive revenue growth greatly exceeded the industry average of 5.6%. Since the same quarter one year prior, revenues leaped by 85.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 85.5% when compared to the same quarter one year prior, rising from -$23.57 million to -$3.42 million.
  • The gross profit margin for LEGACY RESERVES LP is rather high; currently it is at 53.74%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -3.23% trails the industry average.
  • LEGACY RESERVES LP 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, LEGACY RESERVES LP reported lower earnings of $1.43 versus $1.71 in the prior year. For the next year, the market is expecting a contraction of 62.2% in earnings ($0.54 versus $1.43).
  • The debt-to-equity ratio of 1.43 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, LGCY has a quick ratio of 0.64, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

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

Alto Palermo

Dividend Yield: 7.60%

Alto Palermo (NASDAQ: APSA) shares currently have a dividend yield of 7.60%.

Alto Palermo S.A. engages in the ownership, acquisition, development, leasing, management, and operation of shopping centers, as well as residential and commercial complexes in Argentina. The company has a P/E ratio of 11.89.

The average volume for Alto Palermo has been 2,300 shares per day over the past 30 days. Alto Palermo has a market cap of $723.0 million and is part of the real estate industry. Shares are up 9% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Alto Palermo as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, revenue growth and solid stock price performance. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.

Highlights from the ratings report include:
  • Compared to other companies in the Real Estate Management & Development industry and the overall market, ALTO PALERMO SA's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The revenue growth greatly exceeded the industry average of 34.9%. Since the same quarter one year prior, revenues slightly increased by 3.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 130.76% and other important driving factors, this stock has surged by 46.77% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • Even though the current debt-to-equity ratio is 1.19, it is still below the industry average, suggesting that this level of debt is acceptable within the Real Estate Management & Development industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.10 is sturdy.
  • Net operating cash flow has declined marginally to $45.56 million or 3.97% 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.

Rait Financial

Dividend Yield: 7.60%

Rait Financial (NYSE: RAS) shares currently have a dividend yield of 7.60%.

RAIT Financial Trust operates as a self-managed and self-advised real estate investment trust (REIT). The company, through its subsidiaries, invests in, manages, and services real estate-related assets with a focus on commercial real estate.

The average volume for Rait Financial has been 1,125,800 shares per day over the past 30 days. Rait Financial has a market cap of $590.1 million and is part of the real estate industry. Shares are down 6.6% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Rait Financial as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • RAS's revenue growth has slightly outpaced the industry average of 9.6%. Since the same quarter one year prior, revenues rose by 10.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 35.13% and other important driving factors, this stock has surged by 40.12% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • RAIT FINANCIAL TRUST has improved earnings per share by 35.1% 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, RAIT FINANCIAL TRUST reported poor results of -$3.92 versus -$1.36 in the prior year. This year, the market expects an improvement in earnings ($0.61 versus -$3.92).
  • The gross profit margin for RAIT FINANCIAL TRUST is rather low; currently it is at 20.78%. Regardless of RAS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, RAS's net profit margin of -16.59% significantly underperformed when compared to the industry average.
  • 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, RAIT FINANCIAL TRUST'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.

BP Prudhoe Bay Royalty

Dividend Yield: 13.60%

BP Prudhoe Bay Royalty (NYSE: BPT) shares currently have a dividend yield of 13.60%.

BP Prudhoe Bay Royalty Trust operates as a grantor trust in the United States. The company holds overriding royalty interests constituting a non-operational interest in minerals in the Prudhoe Bay oil field located on the North Slope in Alaska. The company has a P/E ratio of 28.11.

The average volume for BP Prudhoe Bay Royalty has been 132,300 shares per day over the past 30 days. BP Prudhoe Bay Royalty has a market cap of $1.6 billion and is part of the energy industry. Shares are down 5.8% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates BP Prudhoe Bay Royalty 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, notable return on equity 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 and deteriorating net income.

Highlights from the ratings report include:
  • BPT 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. To add to this, BPT has a quick ratio of 2.34, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, BP PRUDHOE BAY ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for BP PRUDHOE BAY ROYALTY TRUST is currently very high, coming in at 100.00%. BPT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, BPT's net profit margin of 99.08% significantly outperformed against the industry.
  • The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 7.3% when compared to the same quarter one year ago, dropping from $49.49 million to $45.86 million.
  • BP PRUDHOE BAY ROYALTY TRUST's earnings per share declined by 7.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, BP PRUDHOE BAY ROYALTY TRUST reported lower earnings of $9.29 versus $9.40 in the prior year.

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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