What To Hold: 3 Hold-Rated Dividend Stocks APTS, CORR, MCGC

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 which could 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."

Preferred Apartment Communities

Dividend Yield: 7.90%

Preferred Apartment Communities (AMEX: APTS) shares currently have a dividend yield of 7.90%.

Preferred Apartment Communities, Inc. is a real estate investment trust launched and managed by Preferred Apartment Advisors, LLC. The fund invests in real estate markets of the United States. It primarily acquires and operates multifamily apartment properties.

The average volume for Preferred Apartment Communities has been 56,500 shares per day over the past 30 days. Preferred Apartment Communities has a market cap of $124.0 million and is part of the real estate industry. Shares are up 0.8% year-to-date as of the close of trading on Friday.

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

Highlights from the ratings report include:
  • APTS's very impressive revenue growth greatly exceeded the industry average of 6.7%. Since the same quarter one year prior, revenues leaped by 63.1%. 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 PREFERRED APARTMENT CMNTYS is rather high; currently it is at 60.25%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 26.60% is above that of the industry average.
  • PREFERRED APARTMENT CMNTYS 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PREFERRED APARTMENT CMNTYS reported poor results of -$2.00 versus -$0.11 in the prior year. This year, the market expects an improvement in earnings ($0.07 versus -$2.00).
  • APTS has underperformed the S&P 500 Index, declining 17.60% 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.
  • 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, PREFERRED APARTMENT CMNTYS'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.

CorEnergy Infrastructure

Dividend Yield: 7.30%

CorEnergy Infrastructure (NYSE: CORR) shares currently have a dividend yield of 7.30%.

CorEnergy Infrastructure Trust, Inc. is a trust launched and managed by Corridor InfraTrust Management, LLC. The trust primarily owns midstream and downstream U.S. energy infrastructure assets subject to long-term triple net participating leases with energy companies. The company has a P/E ratio of 34.26.

The average volume for CorEnergy Infrastructure has been 229,300 shares per day over the past 30 days. CorEnergy Infrastructure has a market cap of $216.7 million and is part of the financial services industry. Shares are down 5.6% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates CorEnergy Infrastructure as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and relatively poor performance when compared with the S&P 500 during the past year.

Highlights from the ratings report include:
  • CORR's very impressive revenue growth greatly exceeded the industry average of 7.7%. Since the same quarter one year prior, revenues leaped by 172.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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 Capital Markets industry. The net income increased by 535.3% when compared to the same quarter one year prior, rising from -$0.36 million to $1.58 million.
  • CORENERGY INFRASTRUCTURE TR 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CORENERGY INFRASTRUCTURE TR reported lower earnings of $0.18 versus $1.35 in the prior year. This year, the market expects an improvement in earnings ($0.28 versus $0.18).
  • 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 Capital Markets industry and the overall market on the basis of return on equity, CORENERGY INFRASTRUCTURE TR underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Net operating cash flow has decreased to $4.59 million or 32.68% 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.

MCG Capital Corporation

Dividend Yield: 13.30%

MCG Capital Corporation (NASDAQ: MCGC) shares currently have a dividend yield of 13.30%.

MCG Capital Corporation is a private equity firm specializing in debt, equity, and recapitalization investments in middle and lower middle market companies. The firm seeks to invest in small to mid sized companies. It does not prefer lead and control equity investments. The company has a P/E ratio of 182.50.

The average volume for MCG Capital Corporation has been 679,300 shares per day over the past 30 days. MCG Capital Corporation has a market cap of $265.1 million and is part of the financial services industry. Shares are down 13.6% year-to-date as of the close of trading on Friday.

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

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 146.75% to $11.85 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 119.00%.
  • The gross profit margin for MCG CAPITAL CORP is currently very high, coming in at 77.14%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -164.94% is in-line with the industry average.
  • MCGC, with its decline in revenue, slightly underperformed the industry average of 7.7%. Since the same quarter one year prior, revenues fell by 16.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 Capital Markets industry and the overall market, MCG CAPITAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The share price of MCG CAPITAL CORP has not done very well: it is down 19.83% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.

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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