3 Hold-Rated Dividend Stocks: RWT, RPAI, EEP

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."

Redwood

Dividend Yield: 5.20%

Redwood (NYSE: RWT) shares currently have a dividend yield of 5.20%.

Redwood Trust, Inc., together with its subsidiaries, operates as a specialty finance company in the United States. The company operates in three segments: Residential Mortgage Banking, Residential Investments, and Commercial Mortgage Banking and Investments. The company has a P/E ratio of 10.77.

The average volume for Redwood has been 508,300 shares per day over the past 30 days. Redwood has a market cap of $1.8 billion and is part of the real estate industry. Shares are up 10.5% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Redwood as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. 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 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 8.7%. Since the same quarter one year prior, revenues slightly increased by 7.7%. 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 351.96% to $272.25 million when compared to the same quarter last year. In addition, REDWOOD TRUST INC has also vastly surpassed the industry average cash flow growth rate of -41.99%.
  • 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, REDWOOD TRUST INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The share price of REDWOOD TRUST INC has not done very well: it is down 6.09% 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. 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 40.3% when compared to the same quarter one year ago, falling from $42.08 million to $25.13 million.

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

Retail Properties of America

Dividend Yield: 4.70%

Retail Properties of America (NYSE: RPAI) shares currently have a dividend yield of 4.70%.

Inland Western Retail Real Estate Trust, Inc. is a real estate investment trust. It engages in acquisition, development and management of properties. The trust invests in the real estate markets of United States.

The average volume for Retail Properties of America has been 1,639,800 shares per day over the past 30 days. Retail Properties of America has a market cap of $3.4 billion and is part of the real estate industry. Shares are up 11.6% year-to-date as of the close of trading on Friday.

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

Highlights from the ratings report include:
  • RPAI's revenue growth has slightly outpaced the industry average of 8.7%. Since the same quarter one year prior, revenues rose by 12.0%. 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.
  • 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 162.7% when compared to the same quarter one year prior, rising from $14.12 million to $37.09 million.
  • The gross profit margin for RETAIL PPTYS OF AMERICA INC is currently extremely low, coming in at 4.78%. It has decreased significantly from the same period last year. Regardless of the weak results of the gross profit margin, the net profit margin of 24.69% is above that of the industry average.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, RETAIL PPTYS OF AMERICA INC'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.

Enbridge Energy Partners

Dividend Yield: 7.50%

Enbridge Energy Partners (NYSE: EEP) shares currently have a dividend yield of 7.50%.

Enbridge Energy Partners, L.P. owns and operates crude oil and liquid petroleum transportation and storage assets; and natural gas gathering, treating, processing, transportation, and marketing assets in the United States. It operates through three segments: Liquids, Natural Gas, and Marketing.

The average volume for Enbridge Energy Partners has been 843,200 shares per day over the past 30 days. Enbridge Energy Partners has a market cap of $7.3 billion and is part of the energy industry. Shares are down 4.5% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Enbridge Energy Partners 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:
  • The revenue growth came in higher than the industry average of 7.5%. Since the same quarter one year prior, revenues rose by 10.8%. 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.
  • Net operating cash flow has significantly increased by 89.13% to $269.90 million when compared to the same quarter last year. In addition, ENBRIDGE ENERGY PRTNRS -LP has also vastly surpassed the industry average cash flow growth rate of -22.86%.
  • ENBRIDGE ENERGY PRTNRS -LP 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ENBRIDGE ENERGY PRTNRS -LP swung to a loss, reporting -$0.38 versus $1.25 in the prior year. This year, the market expects an improvement in earnings ($0.93 versus -$0.38).
  • The gross profit margin for ENBRIDGE ENERGY PRTNRS -LP is currently lower than what is desirable, coming in at 27.30%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.46% trails that of the industry average.
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 83.2% when compared to the same quarter one year ago, falling from $54.30 million to $9.10 million.

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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