3 Hold-Rated Dividend Stocks: GARS, MCGC, INTX

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."

Garrison Capital

Dividend Yield: 9.60%

Garrison Capital (NASDAQ: GARS) shares currently have a dividend yield of 9.60%.

Garrison Capital Inc. is a business development company specializing in investments primarily in the debt and equity of middle market companies. The company has a P/E ratio of 7.77.

The average volume for Garrison Capital has been 39,900 shares per day over the past 30 days. Garrison Capital has a market cap of $244.8 million and is part of the financial services industry. Shares are up 5.3% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Garrison Capital as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • GARS's very impressive revenue growth greatly exceeded the industry average of 5.1%. Since the same quarter one year prior, revenues leaped by 106.1%. Growth in the company's revenue appears to have helped boost 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 225.9% when compared to the same quarter one year prior, rising from $3.28 million to $10.68 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, GARRISON CAPITAL INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • GARRISON CAPITAL INC 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, GARRISON CAPITAL INC increased its bottom line by earning $1.42 versus $0.28 in the prior year. For the next year, the market is expecting a contraction of 12.7% in earnings ($1.24 versus $1.42).
  • In its most recent trading session, GARS has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

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: 8.00%

MCG Capital Corporation (NASDAQ: MCGC) shares currently have a dividend yield of 8.00%.

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 average volume for MCG Capital Corporation has been 908,700 shares per day over the past 30 days. MCG Capital Corporation has a market cap of $226.2 million and is part of the financial services industry. Shares are down 20.9% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates MCG Capital Corporation as a hold. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • MCGC, with its decline in revenue, underperformed when compared the industry average of 5.1%. Since the same quarter one year prior, revenues fell by 29.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for MCG CAPITAL CORP is currently very high, coming in at 70.69%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, MCGC's net profit margin of -202.61% significantly underperformed when compared to the industry average.
  • MCG CAPITAL CORP 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, MCG CAPITAL CORP reported lower earnings of $0.02 versus $0.08 in the prior year. This year, the market expects an improvement in earnings ($0.18 versus $0.02).
  • 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 Capital Markets industry. The net income has significantly decreased by 344.3% when compared to the same quarter one year ago, falling from $7.75 million to -$18.94 million.
  • 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 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.

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

Intersections

Dividend Yield: 18.20%

Intersections (NASDAQ: INTX) shares currently have a dividend yield of 18.20%.

Intersections Inc. provides subscription based consumer protection services in the United States and Canada. The company's services help consumers understand and monitor their credit profiles and other personal information, and protect themselves against identity theft or fraud.

The average volume for Intersections has been 123,900 shares per day over the past 30 days. Intersections has a market cap of $81.4 million and is part of the diversified services industry. Shares are down 42.2% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Intersections as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations 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, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • INTX's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.27, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has increased to $5.67 million or 48.20% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 4.25%.
  • INTX, with its decline in revenue, underperformed when compared the industry average of 3.8%. Since the same quarter one year prior, revenues fell by 19.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 Commercial Services & Supplies industry. The net income has significantly decreased by 226.2% when compared to the same quarter one year ago, falling from $2.21 million to -$2.78 million.
  • 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 Commercial Services & Supplies industry and the overall market, INTERSECTIONS 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.

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