What To Hold: 4 Hold-Rated Dividend Stocks RAS, ABR, PFLT, NRT

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."

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 1,198,900 shares per day over the past 30 days. Rait Financial has a market cap of $588.0 million and is part of the real estate industry. Shares are down 10.1% year-to-date as of the close of trading on Friday.

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 increase in stock price during the past year. 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.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
  • 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.

Arbor Realty

Dividend Yield: 7.40%

Arbor Realty (NYSE: ABR) shares currently have a dividend yield of 7.40%.

Arbor Realty Trust, Inc. operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 26.04.

The average volume for Arbor Realty has been 117,100 shares per day over the past 30 days. Arbor Realty has a market cap of $345.4 million and is part of the real estate industry. Shares are up 3.9% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Arbor Realty 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 attractive valuation levels. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • ABR's revenue growth has slightly outpaced the industry average of 9.6%. Since the same quarter one year prior, revenues rose by 18.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 45.28% is the gross profit margin for ARBOR REALTY TRUST INC which we consider to be strong. 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 15.69% trails 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, ARBOR REALTY TRUST 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, ABR 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. 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.

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

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 12.44.

The average volume for PennantPark Floating Rate Capital has been 73,000 shares per day over the past 30 days. PennantPark Floating Rate Capital has a market cap of $203.8 million and is part of the financial services industry. Shares are unchanged 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, weak operating cash flow and disappointing return on equity.

Highlights from the ratings report include:
  • PFLT's very impressive revenue growth greatly exceeded the industry average of 14.8%. 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.
  • PENNANTPARK FLOATING RT CAP's earnings per share declined by 24.1% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, PENNANTPARK FLOATING RT CAP reported lower earnings of $1.30 versus $1.75 in the prior year. For the next year, the market is expecting a contraction of 13.1% in earnings ($1.13 versus $1.30).
  • 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.

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

North European Oil Royalty

Dividend Yield: 9.70%

North European Oil Royalty (NYSE: NRT) shares currently have a dividend yield of 9.70%.

North European Oil Royalty Trust, a grantor trust, holds overriding royalty rights covering gas and oil production in concessions or leases in the Federal Republic of Germany. It holds these rights under contracts with German exploration and development subsidiaries of ExxonMobil Corp. The company has a P/E ratio of 9.72.

The average volume for North European Oil Royalty has been 39,600 shares per day over the past 30 days. North European Oil Royalty has a market cap of $201.0 million and is part of the financial services industry. Shares are up 10.5% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates North European Oil Royalty 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 notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • NRT's revenue growth has slightly outpaced the industry average of 5.7%. Since the same quarter one year prior, revenues slightly increased by 3.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • NRT 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 1.01, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for NORTH EUROPEAN OIL RTY TR is currently very high, coming in at 100.00%. NRT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, NRT's net profit margin of 96.90% significantly outperformed against the industry.
  • NORTH EUROPEAN OIL RTY TR's earnings per share improvement from the most recent quarter was slightly positive. 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, NORTH EUROPEAN OIL RTY TR reported lower earnings of $2.26 versus $2.46 in the prior year.
  • NRT has underperformed the S&P 500 Index, declining 14.94% 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.

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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