3 Hold-Rated Dividend Stocks: QRE, GLAD, MCEP

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."

QR Energy

Dividend Yield: 11.10%

QR Energy (NYSE: QRE) shares currently have a dividend yield of 11.10%.

QR Energy, LP, through its subsidiary, QRE Operating, LLC, is engaged in the acquisition, exploitation, development, and production of oil and natural gas properties in the United States.

The average volume for QR Energy has been 292,800 shares per day over the past 30 days. QR Energy has a market cap of $1.0 billion and is part of the energy industry. Shares are up 4.1% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates QR Energy as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 16.9%. 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 increased to $42.17 million or 24.31% when compared to the same quarter last year. In addition, QR ENERGY LP has also modestly surpassed the industry average cash flow growth rate of 17.43%.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • The debt-to-equity ratio is very high at 2.23 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, QRE maintains a poor quick ratio of 0.87, which illustrates the inability to avoid short-term cash problems.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, QR ENERGY 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.

Gladstone Capital

Dividend Yield: 8.60%

Gladstone Capital (NASDAQ: GLAD) shares currently have a dividend yield of 8.60%.

Gladstone Capital Corporation is a business development company specializing in investments in debt and equity securities. The company has a P/E ratio of 5.90.

The average volume for Gladstone Capital has been 141,000 shares per day over the past 30 days. Gladstone Capital has a market cap of $205.8 million and is part of the financial services industry. Shares are up 2.7% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Gladstone Capital as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and increase in stock price during the past year. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.

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 10.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 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, GLADSTONE CAPITAL CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • GLADSTONE CAPITAL CORP has improved earnings per share by 23.1% 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, GLADSTONE CAPITAL CORP turned its bottom line around by earning $1.53 versus -$0.38 in the prior year. For the next year, the market is expecting a contraction of 45.1% in earnings ($0.84 versus $1.53).
  • The gross profit margin for GLADSTONE CAPITAL CORP is rather high; currently it is at 65.96%. Regardless of GLAD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GLAD's net profit margin of -22.52% significantly underperformed when compared to the industry average.
  • Net operating cash flow has significantly decreased to -$10.72 million or 1241.10% 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.

Mid-Con Energy Partners

Dividend Yield: 9.70%

Mid-Con Energy Partners (NASDAQ: MCEP) shares currently have a dividend yield of 9.70%.

Mid-Con Energy Partners, LP is engaged in the acquisition, exploitation, development, and production of oil and natural gas properties in North America. The company has a P/E ratio of 16.19.

The average volume for Mid-Con Energy Partners has been 72,700 shares per day over the past 30 days. Mid-Con Energy Partners has a market cap of $446.7 million and is part of the energy industry. Shares are down 5.7% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Mid-Con Energy Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and weak operating cash flow.

Highlights from the ratings report include:
  • MCEP's revenue growth has slightly outpaced the industry average of 3.1%. Since the same quarter one year prior, revenues slightly increased by 3.7%. 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.
  • The gross profit margin for MID-CON ENERGY PARTNERS -LP is rather high; currently it is at 69.40%. Regardless of MCEP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MCEP's net profit margin of 7.90% compares favorably to the industry average.
  • MID-CON ENERGY PARTNERS -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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, MID-CON ENERGY PARTNERS -LP reported lower earnings of $1.44 versus $1.63 in the prior year. This year, the market expects an improvement in earnings ($1.45 versus $1.44).
  • 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 61.5% when compared to the same quarter one year ago, falling from $4.06 million to $1.56 million.
  • The debt-to-equity ratio of 1.26 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, MCEP maintains a poor quick ratio of 0.82, which illustrates the inability to avoid short-term cash problems.

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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