What To Hold: 3 Hold-Rated Dividend Stocks MFA, UFS, OAK

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."

MFA Financial

Dividend Yield: 9.70%

MFA Financial (NYSE: MFA) shares currently have a dividend yield of 9.70%.

MFA Financial, Inc., a real estate investment trust (REIT), invests in residential agency and non-agency mortgage-backed securities (MBS). The company has a P/E ratio of 34.25.

The average volume for MFA Financial has been 2,567,100 shares per day over the past 30 days. MFA Financial has a market cap of $3.0 billion and is part of the real estate industry. Shares are up 16.9% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates MFA Financial 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 disappointing return on equity and feeble growth in the company's earnings per share.

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 4.3% when compared to the same quarter one year prior, going from $75.47 million to $78.73 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.5%. Since the same quarter one year prior, revenues slightly increased by 1.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for MFA FINANCIAL INC is currently very high, coming in at 90.76%. Regardless of MFA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MFA's net profit margin of 62.23% significantly outperformed against the industry.
  • MFA FINANCIAL INC has improved earnings per share by 5.3% in the most recent quarter compared to 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, MFA FINANCIAL INC reported lower earnings of $0.79 versus $0.83 in the prior year. For the next year, the market is expecting a contraction of 6.3% in earnings ($0.74 versus $0.79).
  • 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, MFA FINANCIAL INC'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.

Domtar

Dividend Yield: 4.20%

Domtar (NYSE: UFS) shares currently have a dividend yield of 4.20%.

Domtar Corporation designs, manufactures, markets, and distributes communications papers, specialty and packaging papers, and absorbent hygiene products in the United States, Canada, Europe, Asia, and internationally. It operates in two segments, Pulp and Paper, and Personal Care. The company has a P/E ratio of 13.71.

The average volume for Domtar has been 804,700 shares per day over the past 30 days. Domtar has a market cap of $2.3 billion and is part of the consumer non-durables industry. Shares are down 24.9% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Domtar as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins.

Highlights from the ratings report include:
  • UFS's revenue growth has slightly outpaced the industry average of 2.6%. Since the same quarter one year prior, revenues slightly increased by 5.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.51, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.08, which illustrates the ability to avoid short-term cash problems.
  • DOMTAR CORP 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, DOMTAR CORP reported lower earnings of $1.37 versus $2.38 in the prior year. This year, the market expects an improvement in earnings ($3.20 versus $1.37).
  • The gross profit margin for DOMTAR CORP is rather low; currently it is at 20.00%. Regardless of UFS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, UFS's net profit margin of 2.88% compares favorably to the industry average.
  • Net operating cash flow has decreased to $104.00 million or 13.33% when compared to the same quarter last year. Despite a decrease in cash flow DOMTAR CORP is still fairing well by exceeding its industry average cash flow growth rate of -28.73%.

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

Oaktree Capital Group

Dividend Yield: 4.50%

Oaktree Capital Group (NYSE: OAK) shares currently have a dividend yield of 4.50%.

Oaktree Capital Group, LLC operates as a global investment management firm that focuses on alternative markets. The company has a P/E ratio of 10.36.

The average volume for Oaktree Capital Group has been 287,900 shares per day over the past 30 days. Oaktree Capital Group has a market cap of $2.1 billion and is part of the financial services industry. Shares are down 17.5% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Oaktree Capital Group 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 unimpressive growth in net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • 37.19% is the gross profit margin for OAKTREE CAPITAL GROUP LLC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.17% trails the industry average.
  • The revenue fell significantly faster than the industry average of 2.6%. Since the same quarter one year prior, revenues fell by 46.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • OAKTREE CAPITAL GROUP 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. 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, OAKTREE CAPITAL GROUP LLC increased its bottom line by earning $6.43 versus $3.56 in the prior year. For the next year, the market is expecting a contraction of 40.1% in earnings ($3.85 versus $6.43).
  • The share price of OAKTREE CAPITAL GROUP LLC has not done very well: it is down 11.15% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
  • 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 44.9% when compared to the same quarter one year ago, falling from $56.58 million to $31.19 million.

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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