What To Hold: 3 Hold-Rated Dividend Stocks PMT, CVRR, TWO

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."

PennyMac Mortgage Investment

Dividend Yield: 10.80%

PennyMac Mortgage Investment (NYSE: PMT) shares currently have a dividend yield of 10.80%.

PennyMac Mortgage Investment Trust, a specialty finance company, through its subsidiaries, invests primarily in residential mortgage loans and mortgage-related assets. The company operates through two segments, Correspondent Lending and Investment Activities. The company has a P/E ratio of 8.54.

The average volume for PennyMac Mortgage Investment has been 624,400 shares per day over the past 30 days. PennyMac Mortgage Investment has a market cap of $1.6 billion and is part of the real estate industry. Shares are down 5.1% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates PennyMac Mortgage Investment as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, 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, unimpressive growth in net income and disappointing return on equity.

Highlights from the ratings report include:
  • The gross profit margin for PENNYMAC MORTGAGE INVEST TR is rather high; currently it is at 65.82%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 39.29% 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.
  • PENNYMAC MORTGAGE INVEST TR's earnings per share declined by 44.4% 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, PENNYMAC MORTGAGE INVEST TR reported lower earnings of $3.02 versus $3.08 in the prior year. For the next year, the market is expecting a contraction of 22.1% in earnings ($2.35 versus $3.02).
  • 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 28.9% when compared to the same quarter one year ago, falling from $53.30 million to $37.87 million.

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

CVR Refining

Dividend Yield: 15.30%

CVR Refining (NYSE: CVRR) shares currently have a dividend yield of 15.30%.

CVR Refining, LP operates as a petroleum refiner in the United States. The company has a P/E ratio of 6.54.

The average volume for CVR Refining has been 604,800 shares per day over the past 30 days. CVR Refining has a market cap of $3.8 billion and is part of the energy industry. Shares are up 14% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates CVR Refining as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • CVRR's revenue growth has slightly outpaced the industry average of 3.2%. Since the same quarter one year prior, revenues slightly increased by 4.5%. 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 current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.42, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has slightly increased to $258.20 million or 7.78% when compared to the same quarter last year. Despite an increase in cash flow, CVR REFINING LP's average is still marginally south of the industry average growth rate of 17.51%.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, CVRR has underperformed the S&P 500 Index, declining 5.41% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The gross profit margin for CVR REFINING LP is currently extremely low, coming in at 8.96%. 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 11.17% is above that of the industry average.

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

Two Harbors Investment

Dividend Yield: 10.00%

Two Harbors Investment (NYSE: TWO) shares currently have a dividend yield of 10.00%.

Two Harbors Investment Corp. operates as a real estate investment trust (REIT) that focuses on investing in, financing, and managing residential mortgage-backed securities (RMBS), residential mortgage loans, mortgage servicing rights, and other financial assets. The company has a P/E ratio of 9.53.

The average volume for Two Harbors Investment has been 3,636,000 shares per day over the past 30 days. Two Harbors Investment has a market cap of $3.8 billion and is part of the real estate industry. Shares are up 12% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Two Harbors Investment as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, 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 unimpressive growth in net income and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 2327.34% to $456.25 million when compared to the same quarter last year. In addition, TWO HARBORS INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of 29.86%.
  • 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.
  • TWO HARBORS INVESTMENT 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, TWO HARBORS INVESTMENT CORP increased its bottom line by earning $1.66 versus $1.11 in the prior year. For the next year, the market is expecting a contraction of 39.1% in earnings ($1.01 versus $1.66).
  • 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 120.3% when compared to the same quarter one year ago, falling from $143.72 million to -$29.15 million.

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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