3 Hold-Rated Dividend Stocks: MFA, PDM, EPB

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."

MFA Financial

Dividend Yield: 10.10%

MFA Financial (NYSE: MFA) shares currently have a dividend yield of 10.10%.

MFA Financial, Inc., a real estate investment trust (REIT), invests in residential agency and non-agency mortgage-backed securities (MBS). The company has a P/E ratio of 10.19.

The average volume for MFA Financial has been 2,695,100 shares per day over the past 30 days. MFA Financial has a market cap of $2.9 billion and is part of the real estate industry. Shares are up 12.6% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates MFA Financial as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.7%. Since the same quarter one year prior, revenues slightly increased by 0.4%. 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 exceeded that of the Real Estate Investment Trusts (REITs) industry average, but is less than that of the S&P 500. The net income increased by 13.5% when compared to the same quarter one year prior, going from $69.22 million to $78.56 million.
  • MFA has underperformed the S&P 500 Index, declining 12.87% 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.
  • Net operating cash flow has declined marginally to $70.96 million or 8.78% 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.

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: 4.60%

Piedmont Office Realty (NYSE: PDM) shares currently have a dividend yield of 4.60%.

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 38.14.

The average volume for Piedmont Office Realty has been 988,700 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 6.2% 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, weak operating cash flow 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 105.2% when compared to the same quarter one year prior, rising from $14.44 million to $29.62 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.7%. Since the same quarter one year prior, revenues slightly increased by 4.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • PIEDMONT OFFICE REALTY TRUST has improved earnings per share by 12.5% 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 year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, PIEDMONT OFFICE REALTY TRUST increased its bottom line by earning $0.44 versus $0.36 in the prior year. For the next year, the market is expecting a contraction of 29.5% in earnings ($0.31 versus $0.44).
  • The gross profit margin for PIEDMONT OFFICE REALTY TRUST is rather low; currently it is at 21.21%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 21.43% trails that of the industry average.
  • Net operating cash flow has decreased to $46.73 million or 42.05% 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.

El Paso Pipeline Partners

Dividend Yield: 7.80%

El Paso Pipeline Partners (NYSE: EPB) shares currently have a dividend yield of 7.80%.

El Paso Pipeline Partners, L.P. owns and operates interstate natural gas transportation and terminaling facilities in the United States. The company has a P/E ratio of 16.45.

The average volume for El Paso Pipeline Partners has been 986,600 shares per day over the past 30 days. El Paso Pipeline Partners has a market cap of $7.2 billion and is part of the energy industry. Shares are down 7.6% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates El Paso Pipeline Partners as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, generally higher debt management risk and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, EL PASO PIPELINE PARTNERS LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • The gross profit margin for EL PASO PIPELINE PARTNERS LP is currently very high, coming in at 82.46%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 45.28% significantly outperformed against the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.6%. Since the same quarter one year prior, revenues slightly dropped by 1.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • EL PASO PIPELINE PARTNERS LP's earnings per share declined by 6.9% 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, EL PASO PIPELINE PARTNERS LP reported lower earnings of $1.86 versus $2.15 in the prior year. For the next year, the market is expecting a contraction of 8.1% in earnings ($1.71 versus $1.86).
  • The debt-to-equity ratio is very high at 2.15 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.

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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