What To Hold: 3 Hold-Rated Dividend Stocks STON, RSO, MCC

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."

Stonemor Partners

Dividend Yield: 9.80%

Stonemor Partners (NYSE: STON) shares currently have a dividend yield of 9.80%.

StoneMor Partners L.P., together with its subsidiaries, owns and operates cemeteries in the United States. It operates through Cemetery Operations Southeast, Cemetery Operations Northeast, Cemetery Operations West, and Funeral Homes segments.

The average volume for Stonemor Partners has been 84,200 shares per day over the past 30 days. Stonemor Partners has a market cap of $579.1 million and is part of the diversified services industry. Shares are down 4.7% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Stonemor Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins 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 a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • STON's revenue growth has slightly outpaced the industry average of 2.1%. Since the same quarter one year prior, revenues slightly increased by 6.3%. 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 STONEMOR PARTNERS LP is rather high; currently it is at 51.35%. 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 -5.61% is in-line with the industry average.
  • STONEMOR PARTNERS LP has improved earnings per share by 20.0% 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, STONEMOR PARTNERS LP reported poor results of -$0.88 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings (-$0.32 versus -$0.88).
  • Net operating cash flow has significantly decreased to -$1.82 million or 265.51% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Diversified Consumer Services industry and the overall market, STONEMOR PARTNERS LP'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.

Resource Capital

Dividend Yield: 14.90%

Resource Capital (NYSE: RSO) shares currently have a dividend yield of 14.90%.

Resource Capital Corp., a diversified real estate investment trust, primarily focuses on originating, holding, and managing commercial mortgage loans and other commercial real estate-related debt and equity investments in the United States. The company has a P/E ratio of 15.76.

The average volume for Resource Capital has been 1,212,600 shares per day over the past 30 days. Resource Capital has a market cap of $689.2 million and is part of the real estate industry. Shares are down 8.8% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Resource Capital as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, attractive valuation levels and expanding profit margins. 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:
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income increased by 36.4% when compared to the same quarter one year prior, rising from $12.84 million to $17.52 million.
  • RESOURCE CAPITAL CORP has improved earnings per share by 9.1% 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, RESOURCE CAPITAL CORP reported lower earnings of $0.33 versus $0.72 in the prior year. This year, the market expects an improvement in earnings ($0.47 versus $0.33).
  • RSO has underperformed the S&P 500 Index, declining 18.38% 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 company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RESOURCE CAPITAL CORP's return on equity is below 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.

Medley Capital

Dividend Yield: 11.80%

Medley Capital (NYSE: MCC) shares currently have a dividend yield of 11.80%.

Medley Capital Corporation is a business development company. The fund seeks to invest in privately negotiated debt and equity securities of small and middle market companies. The company has a P/E ratio of 10.86.

The average volume for Medley Capital has been 699,200 shares per day over the past 30 days. Medley Capital has a market cap of $653.0 million and is part of the financial services industry. Shares are down 9.8% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Medley Capital as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and increase in net income. 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 disappointing return on equity.

Highlights from the ratings report include:
  • MCC's very impressive revenue growth greatly exceeded the industry average of 5.1%. Since the same quarter one year prior, revenues leaped by 55.4%. 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 gross profit margin for MEDLEY CAPITAL CORP is rather high; currently it is at 67.42%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 39.62% significantly outperformed against the industry average.
  • MEDLEY CAPITAL CORP's earnings per share declined by 30.0% 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, MEDLEY CAPITAL CORP increased its bottom line by earning $1.32 versus $1.24 in the prior year. This year, the market expects an improvement in earnings ($1.55 versus $1.32).
  • The share price of MEDLEY CAPITAL CORP has not done very well: it is down 19.98% 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.
  • Net operating cash flow has significantly decreased to -$128.59 million or 332.01% 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.

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