What To Hold: 5 Hold-Rated Dividend Stocks VLCCF, EFC, UMH, GLAD, 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 5 stocks with substantial yields, that ultimately, we have rated "Hold."

Knightsbridge Tankers

Dividend Yield: 7.60%

Knightsbridge Tankers (NASDAQ: VLCCF) shares currently have a dividend yield of 7.60%.

Knightsbridge Tankers Limited, a shipping company, engages in the seaborne transportation of crude oil and dry bulk cargoes worldwide. As of December 31, 2012, it owned and operated one very large crude carrier and four Capesize dry bulk carriers.

The average volume for Knightsbridge Tankers has been 426,200 shares per day over the past 30 days. Knightsbridge Tankers has a market cap of $226.6 million and is part of the transportation industry. Shares are up 8.2% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Knightsbridge Tankers as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, disappointing return on equity and weak operating cash flow.

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 Oil, Gas & Consumable Fuels industry. The net income increased by 101.8% when compared to the same quarter one year prior, rising from -$57.01 million to $1.01 million.
  • The gross profit margin for KNIGHTSBRIDGE TANKERS LTD is rather high; currently it is at 57.25%. Regardless of VLCCF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VLCCF's net profit margin of 10.13% compares favorably to the industry average.
  • VLCCF, with its decline in revenue, slightly underperformed the industry average of 1.4%. Since the same quarter one year prior, revenues fell by 10.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Net operating cash flow has significantly decreased to $3.64 million or 64.98% 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.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, KNIGHTSBRIDGE TANKERS LTD's return on equity significantly trails that of both the industry average and the S&P 500.

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Ellington Financial

Dividend Yield: 12.80%

Ellington Financial (NYSE: EFC) shares currently have a dividend yield of 12.80%.

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 6.19.

The average volume for Ellington Financial has been 129,700 shares per day over the past 30 days. Ellington Financial has a market cap of $612.1 million and is part of the real estate industry. Shares are up 5.7% 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, attractive valuation levels and expanding profit margins. 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 15.2%. 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.
  • 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.

UMH Properties

Dividend Yield: 7.70%

UMH Properties (NYSE: UMH) shares currently have a dividend yield of 7.70%.

UMH Properties, Inc. (UMH) is a real estate investment trust. The firm engages in the ownership and operation of manufactured home communities. It leases manufactured home spaces to private manufactured home owners, as well as leases homes to residents. The company has a P/E ratio of 30.10.

The average volume for UMH Properties has been 81,000 shares per day over the past 30 days. UMH Properties has a market cap of $186.0 million and is part of the real estate industry. Shares are down 1.7% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates UMH Properties as a hold. Among the primary strengths of the company is its robust revenue growth -- not just in the most recent periods but in previous quarters as well. At the same time, however, we also find weaknesses including feeble growth in the company's earnings per share, unimpressive growth in net income and disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 9.7%. Since the same quarter one year prior, revenues rose by 20.8%. 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.
  • This stock's share value has moved by only 7.44% over the past year. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
  • UMH PROPERTIES INC's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, UMH PROPERTIES INC reported lower earnings of $0.11 versus $0.14 in the prior year.
  • The gross profit margin for UMH PROPERTIES INC is rather low; currently it is at 16.46%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.48% significantly trails the industry average.
  • Net operating cash flow has significantly decreased to -$0.06 million or 108.80% 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.

Gladstone Capital

Dividend Yield: 8.70%

Gladstone Capital (NASDAQ: GLAD) shares currently have a dividend yield of 8.70%.

Gladstone Capital Corporation is a business development company specializing in investments in debt and equity securities. The company has a P/E ratio of 5.96.

The average volume for Gladstone Capital has been 136,300 shares per day over the past 30 days. Gladstone Capital has a market cap of $203.9 million and is part of the financial services industry. Shares are down 0.6% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Gladstone Capital as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, notable return on equity and attractive valuation levels. 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:
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Capital Markets industry average. The net income increased by 25.6% when compared to the same quarter one year prior, rising from $8.37 million to $10.51 million.
  • 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. In comparison to the other companies in the Capital Markets industry and the overall market, GLADSTONE CAPITAL CORP's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • GLADSTONE CAPITAL CORP has improved earnings per share by 25.0% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, GLADSTONE CAPITAL CORP turned its bottom line around by earning $1.53 versus -$0.38 in the prior year. For the next year, the market is expecting a contraction of 45.1% in earnings ($0.84 versus $1.53).
  • Net operating cash flow has significantly decreased to -$1.20 million or 113.62% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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: 8.70%

Deswell Industries (NASDAQ: DSWL) shares currently have a dividend yield of 8.70%.

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 44,400 shares per day over the past 30 days. Deswell Industries has a market cap of $37.5 million and is part of the consumer non-durables industry. Shares are up 5.4% 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 8.6%. 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.
  • In its most recent trading session, DSWL 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.
  • 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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