What To Hold: 3 Hold-Rated Dividend Stocks ABR, EDUC, ACRE

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 3 stocks with substantial yields, that ultimately, we have rated "Hold."

Arbor Realty

Dividend Yield: 7.60%

Arbor Realty (NYSE: ABR) shares currently have a dividend yield of 7.60%.

Arbor Realty Trust, Inc. operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 25.19.

The average volume for Arbor Realty has been 101,400 shares per day over the past 30 days. Arbor Realty has a market cap of $334.1 million and is part of the real estate industry. Shares are up 4.3% year-to-date as of the close of trading on Thursday.

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 9.7%. 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.

Educational Development Corporation

Dividend Yield: 9.40%

Educational Development Corporation (NASDAQ: EDUC) shares currently have a dividend yield of 9.40%.

Educational Development Corporation operates as a trade publisher of the line of children's books in the United States. The company has a P/E ratio of 31.09.

The average volume for Educational Development Corporation has been 6,900 shares per day over the past 30 days. Educational Development Corporation has a market cap of $13.6 million and is part of the media industry. Shares are up 11.4% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Educational Development Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity.

Highlights from the ratings report include:
  • EDUC's revenue growth has slightly outpaced the industry average of 7.5%. Since the same quarter one year prior, revenues slightly increased by 8.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for EDUCATIONAL DEVELOPMENT CORP is rather high; currently it is at 61.24%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 6.44% is above that of the industry average.
  • The net income growth from the same quarter one year ago has exceeded that of the Distributors industry average, but is less than that of the S&P 500. The net income increased by 4.2% when compared to the same quarter one year prior, going from $0.53 million to $0.55 million.
  • EDUC has underperformed the S&P 500 Index, declining 11.93% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • 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 Distributors industry and the overall market, EDUCATIONAL DEVELOPMENT CORP'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.

Ares Commercial Real Estate

Dividend Yield: 7.60%

Ares Commercial Real Estate (NYSE: ACRE) shares currently have a dividend yield of 7.60%.

Ares Commercial Real Estate Corporation, a specialty finance company, operates as a real estate investment trust (REIT). It originates, invests in, and manages middle-market commercial real estate (CRE) loans and other commercial real estate investments. The company has a P/E ratio of 14.68.

The average volume for Ares Commercial Real Estate has been 256,200 shares per day over the past 30 days. Ares Commercial Real Estate has a market cap of $376.2 million and is part of the real estate industry. Shares are up 2.3% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Ares Commercial Real Estate as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. 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:
  • ACRE's very impressive revenue growth greatly exceeded the industry average of 9.7%. Since the same quarter one year prior, revenues leaped by 697.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • ARES COMMERCIAL REAL ESTATE reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($0.86 versus $0.10).
  • Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ARES COMMERCIAL REAL ESTATE underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • ACRE has underperformed the S&P 500 Index, declining 21.79% 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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