What To Hold: 3 Hold-Rated Dividend Stocks SRC, SPLS, CBL

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."

Spirit Realty Capital

Dividend Yield: 5.80%

Spirit Realty Capital (NYSE: SRC) shares currently have a dividend yield of 5.80%.

Spirit Realty Capital, Inc is a publicly traded real estate investment trust.

The average volume for Spirit Realty Capital has been 5,145,800 shares per day over the past 30 days. Spirit Realty Capital has a market cap of $4.3 billion and is part of the real estate industry. Shares are up 16.2% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Spirit Realty Capital as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and poor profit margins.

Highlights from the ratings report include:
  • SRC's very impressive revenue growth greatly exceeded the industry average of 10.0%. Since the same quarter one year prior, revenues leaped by 109.6%. 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.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. 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.
  • The gross profit margin for SPIRIT REALTY CAPITAL INC is currently lower than what is desirable, coming in at 29.61%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -59.17% is significantly below that of the industry average.
  • 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 669.7% when compared to the same quarter one year ago, falling from -$11.67 million to -$89.82 million.

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

Staples

Dividend Yield: 4.20%

Staples (NASDAQ: SPLS) shares currently have a dividend yield of 4.20%.

Staples, Inc., together with its subsidiaries, operates office products superstores. It operates in three segments: North American Stores & Online, North American Commercial, and International Operations. The company has a P/E ratio of 11.95.

The average volume for Staples has been 9,953,500 shares per day over the past 30 days. Staples has a market cap of $7.4 billion and is part of the specialty retail industry. Shares are down 28.1% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Staples 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 largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has slightly increased to $359.85 million or 3.53% when compared to the same quarter last year. In addition, STAPLES INC has also modestly surpassed the industry average cash flow growth rate of -3.20%.
  • SPLS's debt-to-equity ratio is very low at 0.19 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 0.74 is somewhat weak and could be cause for future problems.
  • 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 Specialty Retail industry. The net income has significantly decreased by 43.4% when compared to the same quarter one year ago, falling from $169.93 million to $96.21 million.
  • The gross profit margin for STAPLES INC is currently lower than what is desirable, coming in at 26.94%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.70% trails 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.

CBL & Associates Properties

Dividend Yield: 5.30%

CBL & Associates Properties (NYSE: CBL) shares currently have a dividend yield of 5.30%.

CBL & Associates Properties, Inc. is a public real estate investment trust. It engages in acquisition, development, and management of properties. The fund invests in the real estate markets of United States. Its portfolio consists of enclosed malls and open-air centers. The company has a P/E ratio of 31.34.

The average volume for CBL & Associates Properties has been 1,215,700 shares per day over the past 30 days. CBL & Associates Properties has a market cap of $3.1 billion and is part of the real estate industry. Shares are up 2.4% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates CBL & Associates Properties as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and reasonable valuation levels. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

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 223.8% when compared to the same quarter one year prior, rising from $11.72 million to $37.96 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.5%. Since the same quarter one year prior, revenues slightly increased by 1.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CBL & ASSOCIATES PPTYS INC 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, CBL & ASSOCIATES PPTYS INC reported lower earnings of $0.27 versus $0.59 in the prior year. This year, the market expects an improvement in earnings ($0.80 versus $0.27).
  • 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CBL & ASSOCIATES PPTYS INC's return on equity is below that of both the industry average and the S&P 500.
  • CBL has underperformed the S&P 500 Index, declining 17.88% 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.

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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