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

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."

Arbor Realty

Dividend Yield: 7.60%

Arbor Realty (NYSE: ABR) shares currently have a dividend yield of 7.60%.

Arbor Realty Trust, Inc. operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 20.82.

The average volume for Arbor Realty has been 109,600 shares per day over the past 30 days. Arbor Realty has a market cap of $344.4 million and is part of the real estate industry. Shares are up 3.1% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Arbor Realty as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry average. 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.
  • 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 gross profit margin for ARBOR REALTY TRUST INC is rather high; currently it is at 52.02%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 21.65% trails the industry average.
  • 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.

Educational Development

Dividend Yield: 7.50%

Educational Development (NASDAQ: EDUC) shares currently have a dividend yield of 7.50%.

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 34.38.

The average volume for Educational Development has been 5,600 shares per day over the past 30 days. Educational Development has a market cap of $17.0 million and is part of the media industry. Shares are up 45.6% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Educational Development as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and expanding profit margins. 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:
  • EDUC's revenue growth has slightly outpaced the industry average of 13.8%. Since the same quarter one year prior, revenues rose by 19.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Distributors industry. The net income increased by 258.2% when compared to the same quarter one year prior, rising from $0.07 million to $0.24 million.
  • EDUC's debt-to-equity ratio is very low at 0.04 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.71 is somewhat weak and could be cause for future problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength 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.
  • Net operating cash flow has significantly decreased to -$0.48 million or 148.44% 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.

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 6.02.

The average volume for Gladstone Capital has been 195,100 shares per day over the past 30 days. Gladstone Capital has a market cap of $211.1 million and is part of the financial services industry. Shares are up 4.5% year-to-date as of the close of trading on Friday.

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 0.1%. 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.

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