What To Hold: 3 Hold-Rated Dividend Stocks EFC, NTLS, EVEP

 

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."

 

Ellington Financial

 

Dividend Yield: 13.00%

 

Ellington Financial (NYSE: EFC) shares currently have a dividend yield of 13.00%.

 

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 10.69.

 

The average volume for Ellington Financial has been 84,300 shares per day over the past 30 days. Ellington Financial has a market cap of $603.7 million and is part of the real estate industry. Shares are up 5.9% year-to-date as of the close of trading on Monday.

 

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 2.9%. 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.
  • ELLINGTON FINANCIAL LLC 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. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, ELLINGTON FINANCIAL LLC reported lower earnings of $3.46 versus $5.32 in the prior year. For the next year, the market is expecting a contraction of 13.9% in earnings ($2.98 versus $3.46).
  • 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.

 

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

 

NTELOS Holdings

 

Dividend Yield: 14.00%

 

NTELOS Holdings (NASDAQ: NTLS) shares currently have a dividend yield of 14.00%. However, the company has decided to eliminate the dividend going forward.

 

NTELOS Holdings Corp., through its subsidiaries, provides digital wireless communications services to consumers and businesses in Virginia and West Virginia, as well as parts of Maryland, North Carolina, Pennsylvania, Ohio, and Kentucky. The company has a P/E ratio of 23.12.

 

The average volume for NTELOS Holdings has been 515,000 shares per day over the past 30 days. NTELOS Holdings has a market cap of $260.7 million and is part of the telecommunications industry. Shares are down 40.8% year-to-date as of the close of trading on Monday.

 

TheStreet Ratings rates NTELOS Holdings as a hold. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and poor profit margins.

 

Highlights from the ratings report include:
  • NTLS, with its decline in revenue, slightly underperformed the industry average of 2.1%. Since the same quarter one year prior, revenues slightly dropped by 1.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 Wireless Telecommunication Services industry and the overall market, NTELOS HOLDINGS CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • NTELOS HOLDINGS 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, NTELOS HOLDINGS CORP increased its bottom line by earning $1.12 versus $0.87 in the prior year. For the next year, the market is expecting a contraction of 58.0% in earnings ($0.47 versus $1.12).
  • The gross profit margin for NTELOS HOLDINGS CORP is currently lower than what is desirable, coming in at 25.61%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.41% significantly trails the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 35.72%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 95.34% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, NTLS is still more expensive than most of the other companies in its industry.

 

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

 

EV Energy Partners

 

Dividend Yield: 8.50%

 

EV Energy Partners (NASDAQ: EVEP) shares currently have a dividend yield of 8.50%.

 

EV Energy Partners, L.P. is engaged in the acquisition, development, and production of oil and natural gas properties in the United States. The company operates in two segments, Exploration and Production, and Midstream.

 

The average volume for EV Energy Partners has been 206,500 shares per day over the past 30 days. EV Energy Partners has a market cap of $1.8 billion and is part of the energy industry. Shares are up 10.7% year-to-date as of the close of trading on Monday.

 

TheStreet Ratings rates EV Energy Partners as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and generally higher debt management risk.

 

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 1.5%. Since the same quarter one year prior, revenues rose by 29.4%. 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 significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 86.6% when compared to the same quarter one year prior, rising from -$46.58 million to -$6.25 million.
  • EV ENERGY 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, EV ENERGY PARTNERS LP reported poor results of -$1.69 versus -$0.35 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus -$1.69).
  • The debt-to-equity ratio of 1.01 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, EVEP's quick ratio is somewhat strong at 1.17, demonstrating the ability to handle short-term liquidity needs.
  • Net operating cash flow has decreased to $32.63 million or 21.15% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly 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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