What To Hold: 3 Hold-Rated Dividend Stocks AINV, TWO, HTA

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."

Apollo Investment

Dividend Yield: 10.00%

Apollo Investment (NASDAQ: AINV) shares currently have a dividend yield of 10.00%.

Apollo Investment Corporation is business development company and operates as a closed-end management investment company. The company invests in middle market companies. It provides direct equity capital, mezzanine and senior secured loans, and subordinated debt and loans. The company has a P/E ratio of 6.66.

The average volume for Apollo Investment has been 3,754,000 shares per day over the past 30 days. Apollo Investment has a market cap of $1.8 billion and is part of the financial services industry. Shares are down 6.2% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Apollo Investment as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 5.1%. Since the same quarter one year prior, revenues rose by 13.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • APOLLO INVESTMENT CORP reported significant earnings per share improvement 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, APOLLO INVESTMENT CORP turned its bottom line around by earning $0.49 versus -$0.45 in the prior year. This year, the market expects an improvement in earnings ($0.90 versus $0.49).
  • 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 Capital Markets industry and the overall market on the basis of return on equity, APOLLO INVESTMENT CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • AINV has underperformed the S&P 500 Index, declining 10.42% 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 significantly decreased to -$122.64 million or 450.50% 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.

Two Harbors Investment

Dividend Yield: 10.20%

Two Harbors Investment (NYSE: TWO) shares currently have a dividend yield of 10.20%.

Two Harbors Investment Corp. operates as a real estate investment trust (REIT) that focuses on investing in, financing, and managing residential mortgage-backed securities (RMBS), residential mortgage loans, mortgage servicing rights, and other financial assets. The company has a P/E ratio of 9.39.

The average volume for Two Harbors Investment has been 3,937,600 shares per day over the past 30 days. Two Harbors Investment has a market cap of $3.7 billion and is part of the real estate industry. Shares are up 9.9% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Two Harbors Investment as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins and notable return on equity. 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:
  • The gross profit margin for TWO HARBORS INVESTMENT CORP is rather high; currently it is at 68.98%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, TWO's net profit margin of -28.36% significantly underperformed when compared to the industry average.
  • The share price of TWO HARBORS INVESTMENT CORP has not done very well: it is down 16.78% 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 120.3% when compared to the same quarter one year ago, falling from $143.72 million to -$29.15 million.

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

Healthcare Trust of America

Dividend Yield: 4.80%

Healthcare Trust of America (NYSE: HTA) shares currently have a dividend yield of 4.80%.

Healthcare Trust of America is a fully integrated, self-administered and internally managed real estate investment trust, or REIT. The company acquires, owns and operates medical office buildings and other facilities that serve the healthcare industry. The company has a P/E ratio of 108.18.

The average volume for Healthcare Trust of America has been 1,830,100 shares per day over the past 30 days. Healthcare Trust of America has a market cap of $2.8 billion and is part of the real estate industry. Shares are up 20.7% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Healthcare Trust of America as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • HTA's revenue growth has slightly outpaced the industry average of 9.8%. Since the same quarter one year prior, revenues rose by 18.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • HEALTHCARE TRUST OF AMERICA reported significant earnings per share improvement 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HEALTHCARE TRUST OF AMERICA turned its bottom line around by earning $0.11 versus -$0.10 in the prior year. This year, the market expects an improvement in earnings ($0.13 versus $0.11).
  • HTA has underperformed the S&P 500 Index, declining 8.68% 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.
  • The gross profit margin for HEALTHCARE TRUST OF AMERICA is rather low; currently it is at 21.38%. Regardless of HTA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, HTA's net profit margin of 5.79% is significantly lower than the industry average.

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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