What To Hold: 3 Hold-Rated Dividend Stocks EDUC, ABR, EFC

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."

Educational Development

Dividend Yield: 8.10%

Educational Development (NASDAQ: EDUC) shares currently have a dividend yield of 8.10%.

Educational Development Corporation operates as a trade publisher of the line of educational children's books in the United States. The company has a P/E ratio of 43.78.

The average volume for Educational Development has been 4,700 shares per day over the past 30 days. Educational Development has a market cap of $15.8 million and is part of the media industry. Shares are up 28.7% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Educational Development as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, 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:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.4%. Since the same quarter one year prior, revenues slightly increased by 5.8%. 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 significantly increased by 511.38% to $1.01 million when compared to the same quarter last year. In addition, EDUCATIONAL DEVELOPMENT CORP has also vastly surpassed the industry average cash flow growth rate of -43.99%.
  • EDUC has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.88 is somewhat weak and could be cause for future problems.
  • 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 Distributors industry. The net income has significantly decreased by 48.3% when compared to the same quarter one year ago, falling from -$0.21 million to -$0.31 million.
  • 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 Distributors industry and the overall market, EDUCATIONAL DEVELOPMENT 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.

Arbor Realty

Dividend Yield: 7.50%

Arbor Realty (NYSE: ABR) shares currently have a dividend yield of 7.50%.

Arbor Realty Trust, Inc. operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 20.94.

The average volume for Arbor Realty has been 110,800 shares per day over the past 30 days. Arbor Realty has a market cap of $346.4 million and is part of the real estate industry. Shares are up 3.6% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Arbor Realty as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share and disappointing return on equity.

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 5.7%. 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 net income growth from the same quarter one year ago has exceeded that of the Real Estate Investment Trusts (REITs) industry average, but is less than that of the S&P 500. The net income increased by 4.1% when compared to the same quarter one year prior, going from $7.17 million to $7.47 million.
  • ARBOR REALTY TRUST INC's earnings per share declined by 36.8% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, ARBOR REALTY TRUST INC reported lower earnings of $0.41 versus $0.65 in the prior year. For the next year, the market is expecting a contraction of 4.9% in earnings ($0.39 versus $0.41).
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ARBOR REALTY TRUST INC underperformed against that of the industry average and is significantly less than 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.

Ellington Financial

Dividend Yield: 13.10%

Ellington Financial (NYSE: EFC) shares currently have a dividend yield of 13.10%.

Ellington Financial LLC, a specialty finance company, acquires and manages mortgage-related assets, including residential mortgage backed securities backed by prime jumbo, Alt-A, manufactured housing and subprime residential mortgage loans, and residential mortgage-backed securities. The company has a P/E ratio of 10.65.

The average volume for Ellington Financial has been 86,500 shares per day over the past 30 days. Ellington Financial has a market cap of $597.9 million and is part of the real estate industry. Shares are up 5% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Ellington Financial as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and good cash flow from operations. 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:
  • The revenue growth came in higher than the industry average of 5.2%. 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.
  • The gross profit margin for ELLINGTON FINANCIAL LLC is currently very high, coming in at 77.73%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 105.29% significantly outperformed against the industry average.
  • 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 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 43.9% when compared to the same quarter one year ago, falling from $40.34 million to $22.64 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. When compared to other companies in the Capital Markets industry and the overall market, ELLINGTON FINANCIAL LLC'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.

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