3 Hold-Rated Dividend Stocks: GLAD, NTLS, MCGC

 

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."

Gladstone Capital

Dividend Yield: 8.40%

Gladstone Capital (NASDAQ:GLAD) shares currently have a dividend yield of 8.40%.

Gladstone Capital Corporation is a business development company specializing in investments in debt and equity securities. The company has a P/E ratio of 6.00.

The average volume for Gladstone Capital has been 191,400 shares per day over the past 30 days. Gladstone Capital has a market cap of $209.2 million and is part of the financial services industry. Shares are up 5.1% 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 solid stock price performance. 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 5.2%. 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.

NTELOS Holdings

Dividend Yield: 13.70%

NTELOS Holdings (NASDAQ:NTLS) shares currently have a dividend yield of 13.70%. However, the company has decided to eliminate the dividend going forward.

NTELOS Holdings Corp., through its subsidiaries, provides digital wireless communications services to consumers and businesses in Virginia and West Virginia, as well as parts of Maryland, North Carolina, Pennsylvania, Ohio, and Kentucky. The company has a P/E ratio of 13.07.

The average volume for NTELOS Holdings has been 538,000 shares per day over the past 30 days. NTELOS Holdings has a market cap of $266.3 million and is part of the telecommunications industry. Shares are down 38.4% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates NTELOS Holdings as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in 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 2.4%. Since the same quarter one year prior, revenues slightly increased by 2.3%. 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 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 Wireless Telecommunication Services industry and the overall market, NTELOS HOLDINGS CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • NTELOS HOLDINGS 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, NTELOS HOLDINGS CORP increased its bottom line by earning $1.12 versus $0.87 in the prior year. For the next year, the market is expecting a contraction of 57.1% in earnings ($0.48 versus $1.12).
  • Net operating cash flow has significantly decreased to $18.49 million or 55.24% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The share price of NTELOS HOLDINGS CORP has not done very well: it is down 23.90% 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. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

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: 7.40%

MCG Capital Corporation (NASDAQ:MCGC) shares currently have a dividend yield of 7.40%.

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 1,026,500 shares per day over the past 30 days. MCG Capital Corporation has a market cap of $245.7 million and is part of the financial services industry. Shares are down 10.9% year-to-date as of the close of trading on Monday.

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 5.2%. 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.

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