4 Hold-Rated Dividend Stocks: HME, PDM, TWO, LXP

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."

Home Properties

Dividend Yield: 5.20%

Home Properties (NYSE: HME) shares currently have a dividend yield of 5.20%.

Home Properties, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in the ownership, management, acquisition, rehabilitation and development of residential apartment communities. The company has a P/E ratio of 32.32.

The average volume for Home Properties has been 399,700 shares per day over the past 30 days. Home Properties has a market cap of $3.1 billion and is part of the real estate industry. Shares are up 1.8% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Home Properties as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, revenue growth and reasonable valuation levels. 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 poor profit margins.

Highlights from the ratings report include:
  • HOME PROPERTIES INC has improved earnings per share by 22.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HOME PROPERTIES INC increased its bottom line by earning $1.36 versus $0.81 in the prior year. This year, the market expects an improvement in earnings ($1.54 versus $1.36).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.6%. Since the same quarter one year prior, revenues slightly increased by 3.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has slightly increased to $68.95 million or 6.32% when compared to the same quarter last year. Despite an increase in cash flow, HOME PROPERTIES INC's average is still marginally south of the industry average growth rate of 8.45%.
  • HME has underperformed the S&P 500 Index, declining 12.52% 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 31.2% when compared to the same quarter one year ago, falling from $36.41 million to $25.04 million.

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

Piedmont Office Realty

Dividend Yield: 4.80%

Piedmont Office Realty (NYSE: PDM) shares currently have a dividend yield of 4.80%.

Piedmont Office Realty Trust, Inc. engages in the acquisition and ownership of commercial real estate properties in the United States. Its property portfolio primarily consists of office and industrial buildings, warehouses, and manufacturing facilities. The company has a P/E ratio of 36.87.

The average volume for Piedmont Office Realty has been 1,088,500 shares per day over the past 30 days. Piedmont Office Realty has a market cap of $2.7 billion and is part of the real estate industry. Shares are up 1.3% year-to-date as of the close of trading on Tuesday.

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

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 76.3% when compared to the same quarter one year prior, rising from $10.83 million to $19.10 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.6%. Since the same quarter one year prior, revenues slightly increased by 8.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has slightly increased to $79.99 million or 8.02% when compared to the same quarter last year. Despite an increase in cash flow, PIEDMONT OFFICE REALTY TRUST's average is still marginally south of the industry average growth rate of 8.45%.
  • PDM has underperformed the S&P 500 Index, declining 12.73% 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 gross profit margin for PIEDMONT OFFICE REALTY TRUST is rather low; currently it is at 24.41%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 13.21% trails that of the industry average.

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

Two Harbors Investment

Dividend Yield: 10.70%

Two Harbors Investment (NYSE: TWO) shares currently have a dividend yield of 10.70%.

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 5.81.

The average volume for Two Harbors Investment has been 4,052,400 shares per day over the past 30 days. Two Harbors Investment has a market cap of $3.6 billion and is part of the real estate industry. Shares are up 5.7% year-to-date as of the close of trading on Tuesday.

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.

Lexington Realty

Dividend Yield: 6.20%

Lexington Realty (NYSE: LXP) shares currently have a dividend yield of 6.20%.

Lexington Corporate Properties Trust operates as a self-managed and self-administered real estate investment trust (REIT). The company acquires, owns, and manages a portfolio of office, industrial, and retail properties net-leased to corporate tenants in the United States.

The average volume for Lexington Realty has been 1,765,100 shares per day over the past 30 days. Lexington Realty has a market cap of $2.4 billion and is part of the real estate industry. Shares are up 5.8% year-to-date as of the close of trading on Tuesday.

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

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.6%. Since the same quarter one year prior, revenues slightly increased by 9.5%. 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 51.32% to $59.93 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 8.45%.
  • LEXINGTON REALTY TRUST 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 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, LEXINGTON REALTY TRUST turned its bottom line around by earning $0.87 versus -$0.29 in the prior year. For the next year, the market is expecting a contraction of 94.8% in earnings ($0.05 versus $0.87).
  • 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 97.3% when compared to the same quarter one year ago, falling from $174.54 million to $4.70 million.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, LEXINGTON REALTY 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.

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