3 Hold-Rated Dividend Stocks: SLRC, STON, GAIN

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."

Solar Capital

Dividend Yield: 7.70%

Solar Capital (NASDAQ: SLRC) shares currently have a dividend yield of 7.70%.

Solar Capital Ltd. is a business development company specializing in investments in leveraged middle market companies. The company has a P/E ratio of 17.40.

The average volume for Solar Capital has been 417,800 shares per day over the past 30 days. Solar Capital has a market cap of $891.7 million and is part of the financial services industry. Shares are down 8.5% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Solar Capital as a hold. The company's strengths can be seen in multiple areas, such as its 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:
  • Net operating cash flow has significantly increased by 1018.68% to $99.04 million when compared to the same quarter last year. In addition, SOLAR CAPITAL LTD has also vastly surpassed the industry average cash flow growth rate of -105.01%.
  • The gross profit margin for SOLAR CAPITAL LTD is rather high; currently it is at 64.41%. Regardless of SLRC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SLRC's net profit margin of 42.13% significantly outperformed against the industry.
  • SLRC, with its decline in revenue, underperformed when compared the industry average of 0.1%. Since the same quarter one year prior, revenues fell by 29.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 61.6% when compared to the same quarter one year ago, falling from $35.81 million to $13.75 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. When compared to other companies in the Capital Markets industry and the overall market, SOLAR CAPITAL LTD'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.

Stonemor Partners

Dividend Yield: 10.00%

Stonemor Partners (NYSE: STON) shares currently have a dividend yield of 10.00%.

StoneMor Partners L.P., together with its subsidiaries, owns and operates cemeteries in the United States. It operates through Cemetery Operations-Southeast, Cemetery Operations-Northeast, Cemetery Operations-West, and Funeral Homes segments.

The average volume for Stonemor Partners has been 125,900 shares per day over the past 30 days. Stonemor Partners has a market cap of $568.9 million and is part of the diversified services industry. Shares are down 4.3% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Stonemor Partners 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 also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • STON's revenue growth has slightly outpaced the industry average of 0.9%. Since the same quarter one year prior, revenues slightly increased by 8.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Diversified Consumer Services industry average. The net income increased by 118.6% when compared to the same quarter one year prior, rising from -$2.20 million to $0.41 million.
  • STONEMOR PARTNERS LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, STONEMOR PARTNERS LP reported poor results of -$0.88 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings (-$0.22 versus -$0.88).
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Diversified Consumer Services industry and the overall market, STONEMOR PARTNERS LP'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 -$2.94 million or 142.81% 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 Investment Corporation

Dividend Yield: 9.70%

Gladstone Investment Corporation (NASDAQ: GAIN) shares currently have a dividend yield of 9.70%.

Gladstone Investment Corporation is a business development company specializing in buyout, recapitalization, and changes in control investments.

The average volume for Gladstone Investment Corporation has been 269,800 shares per day over the past 30 days. Gladstone Investment Corporation has a market cap of $196.2 million and is part of the financial services industry. Shares are down 7.9% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Gladstone Investment 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:
  • The gross profit margin for GLADSTONE INVESTMENT CORP/DE is currently very high, coming in at 70.65%. 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 10.63% trails the industry average.
  • GAIN, with its decline in revenue, underperformed when compared the industry average of 0.1%. Since the same quarter one year prior, revenues fell by 15.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • GLADSTONE INVESTMENT CORP/DE 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, GLADSTONE INVESTMENT CORP/DE swung to a loss, reporting -$0.06 versus $0.63 in the prior year. This year, the market expects an improvement in earnings ($0.72 versus -$0.06).
  • 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 94.1% when compared to the same quarter one year ago, falling from $15.95 million to $0.94 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, GLADSTONE INVESTMENT CORP/DE 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.

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