What To Hold: 3 Hold-Rated Dividend Stocks HME, PBF, RESI

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."

Home Properties

Dividend Yield: 4.60%

Home Properties (NYSE: HME) shares currently have a dividend yield of 4.60%.

Home Properties, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in the ownership, management, acquisition, rehabilitation and development of residential apartment communities. The company has a P/E ratio of 37.87.

The average volume for Home Properties has been 250,500 shares per day over the past 30 days. Home Properties has a market cap of $3.6 billion and is part of the real estate industry. Shares are up 18.9% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Home Properties as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and poor profit margins.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.3%. Since the same quarter one year prior, revenues slightly increased by 3.9%. 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 slightly increased to $78.48 million or 3.73% when compared to the same quarter last year. Despite an increase in cash flow, HOME PROPERTIES INC's cash flow growth rate is still lower than the industry average growth rate of 30.28%.
  • The gross profit margin for HOME PROPERTIES INC is currently lower than what is desirable, coming in at 28.53%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 27.24% is above 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 against the S&P 500 and did not exceed that of the Real Estate Investment Trusts (REITs) industry. The net income has decreased by 11.7% when compared to the same quarter one year ago, dropping from $51.88 million to $45.79 million.

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

PBF Energy

Dividend Yield: 4.30%

PBF Energy (NYSE: PBF) shares currently have a dividend yield of 4.30%.

PBF Energy Inc., together with its subsidiaries, is engaged in the refining and supply of petroleum products. The company has a P/E ratio of 13.12.

The average volume for PBF Energy has been 1,765,000 shares per day over the past 30 days. PBF Energy has a market cap of $2.0 billion and is part of the energy industry. Shares are down 11% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates PBF Energy as a hold. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, increase in net income and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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 net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 579.0% when compared to the same quarter one year prior, rising from $11.41 million to $77.44 million.
  • The current debt-to-equity ratio, 0.59, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.47 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The gross profit margin for PBF ENERGY INC is currently extremely low, coming in at 6.95%. Regardless of PBF's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.63% trails the industry average.
  • 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PBF ENERGY INC's return on equity is significantly below that of the industry average and is below that of 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.

Altisource Residential Corporation

Dividend Yield: 7.00%

Altisource Residential Corporation (NYSE: RESI) shares currently have a dividend yield of 7.00%.

Altisource Residential Corporation, through its wholly-owned subsidiary, Altisource Residential, L.P., focuses on acquiring, owning, and managing single-family rental properties in the United States. The company has a P/E ratio of 10.31.

The average volume for Altisource Residential Corporation has been 559,600 shares per day over the past 30 days. Altisource Residential Corporation has a market cap of $1.5 billion and is part of the real estate industry. Shares are down 11.7% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Altisource Residential Corporation as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and impressive record of earnings per share growth. 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:
  • RESI's very impressive revenue growth greatly exceeded the industry average of 10.3%. Since the same quarter one year prior, revenues leaped by 4818.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 692.30% and other important driving factors, this stock has surged by 70.45% over the past year, outperforming the rise in the S&P 500 Index during the same period. Although RESI had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ALTISOURCE RESIDENTIAL CORP's return on equity is below that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$23.57 million or 1627.78% 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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