What To Hold: 3 Hold-Rated Dividend Stocks CLUB, NKA, RSO

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."

Town Sports International Holdings

Dividend Yield: 10.40%

Town Sports International Holdings (NASDAQ: CLUB) shares currently have a dividend yield of 10.40%.

Town Sports International Holdings, Inc., together with its subsidiaries, owns and operates fitness clubs in the Northeast and Mid-Atlantic regions of the United States. The company has a P/E ratio of 36.29.

The average volume for Town Sports International Holdings has been 259,700 shares per day over the past 30 days. Town Sports International Holdings has a market cap of $149.8 million and is part of the leisure industry. Shares are down 58.3% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Town Sports International Holdings as a hold. The company's strongest point has been its strong cash flow from operations. At the same time, however, we also find weaknesses including deteriorating net income, poor profit margins and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.5%. Since the same quarter one year prior, revenues slightly dropped by 2.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 51.11%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 183.33% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • 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 Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 183.1% when compared to the same quarter one year ago, falling from $4.23 million to -$3.52 million.
  • The gross profit margin for TOWN SPORTS INTL HOLDINGS is rather low; currently it is at 18.75%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.03% is significantly below 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.

Niska Gas Storage Partners

Dividend Yield: 9.20%

Niska Gas Storage Partners (NYSE: NKA) shares currently have a dividend yield of 9.20%.

Niska Gas Storage Partners LLC owns and operates natural gas storage assets in North America.

The average volume for Niska Gas Storage Partners has been 119,500 shares per day over the past 30 days. Niska Gas Storage Partners has a market cap of $552.6 million and is part of the utilities industry. Shares are up 3.6% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Niska Gas Storage Partners as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.

Highlights from the ratings report include:
  • NKA's very impressive revenue growth greatly exceeded the industry average of 3.5%. Since the same quarter one year prior, revenues leaped by 104.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • NISKA GAS STORAGE PARTNERS reported significant earnings per share improvement 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, NISKA GAS STORAGE PARTNERS continued to lose money by earning -$0.24 versus -$0.63 in the prior year. This year, the market expects an improvement in earnings ($0.95 versus -$0.24).
  • 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.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NISKA GAS STORAGE PARTNERS's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio of 1.28 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, NKA maintains a poor quick ratio of 0.75, which illustrates the inability to avoid short-term cash problems.

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

Resource Capital

Dividend Yield: 14.40%

Resource Capital (NYSE: RSO) shares currently have a dividend yield of 14.40%.

Resource Capital Corp., a diversified real estate investment trust, primarily focuses on originating, holding, and managing commercial mortgage loans and other commercial real estate-related debt and equity investments in the United States. The company has a P/E ratio of 16.38.

The average volume for Resource Capital has been 1,007,600 shares per day over the past 30 days. Resource Capital has a market cap of $719.6 million and is part of the real estate industry. Shares are down 5.7% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Resource Capital as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, attractive valuation levels 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:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 36.4% when compared to the same quarter one year prior, rising from $12.84 million to $17.52 million.
  • RESOURCE CAPITAL CORP has improved earnings per share by 9.1% 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, RESOURCE CAPITAL CORP reported lower earnings of $0.33 versus $0.72 in the prior year. This year, the market expects an improvement in earnings ($0.52 versus $0.33).
  • Net operating cash flow has decreased to $19.17 million or 17.72% when compared to the same quarter last year. Despite a decrease in cash flow RESOURCE CAPITAL CORP is still fairing well by exceeding its industry average cash flow growth rate of -37.20%.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, RESOURCE CAPITAL CORP'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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