What To Hold: 3 Hold-Rated Dividend Stocks APTS, ABR, RAS

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."

Preferred Apartment Communities

Dividend Yield: 7.40%

Preferred Apartment Communities (AMEX: APTS) shares currently have a dividend yield of 7.40%.

Preferred Apartment Communities, Inc. is a real estate investment trust launched and managed by Preferred Apartment Advisors, LLC. The fund invests in real estate markets of the United States. It primarily acquires and operates multifamily apartment properties. The company has a P/E ratio of 10.48.

The average volume for Preferred Apartment Communities has been 86,700 shares per day over the past 30 days. Preferred Apartment Communities has a market cap of $149.1 million and is part of the real estate industry. Shares are up 8.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Preferred Apartment Communities as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels and compelling growth in net income. However, as a counter to these strengths, we find that the stock has experienced relatively poor performance when compared with the S&P 500 during the past year.

Highlights from the ratings report include:
  • APTS's very impressive revenue growth greatly exceeded the industry average of 10.1%. Since the same quarter one year prior, revenues leaped by 57.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • PREFERRED APARTMENT CMNTYS 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, PREFERRED APARTMENT CMNTYS reported poor results of -$2.02 versus -$0.17 in the prior year. This year, the market expects an improvement in earnings ($0.17 versus -$2.02).
  • In its most recent trading session, APTS has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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 company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, PREFERRED APARTMENT CMNTYS underperformed against that of the industry average and is significantly less than that of the S&P 500.

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Arbor Realty

Dividend Yield: 7.50%

Arbor Realty (NYSE: ABR) shares currently have a dividend yield of 7.50%.

Arbor Realty Trust, Inc. operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 13.88.

The average volume for Arbor Realty has been 120,900 shares per day over the past 30 days. Arbor Realty has a market cap of $350.3 million and is part of the real estate industry. Shares are up 4.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Arbor Realty as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including 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 221.9% when compared to the same quarter one year prior, rising from $4.15 million to $13.36 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.1%. Since the same quarter one year prior, revenues slightly increased by 4.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • ARBOR REALTY TRUST 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, ARBOR REALTY TRUST INC reported lower earnings of $0.41 versus $0.65 in the prior year. This year, the market expects an improvement in earnings ($0.46 versus $0.41).
  • ABR has underperformed the S&P 500 Index, declining 6.51% 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.
  • Net operating cash flow has decreased to $8.91 million or 20.75% 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.

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Rait Financial

Dividend Yield: 9.20%

Rait Financial (NYSE: RAS) shares currently have a dividend yield of 9.20%.

RAIT Financial Trust operates as a self-managed and self-advised real estate investment trust (REIT). The company, through its subsidiaries, invests in, manages, and services real estate-related assets with a focus on commercial real estate.

The average volume for Rait Financial has been 602,100 shares per day over the past 30 days. Rait Financial has a market cap of $646.9 million and is part of the real estate industry. Shares are down 11.5% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Rait Financial 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 increase in stock price during the past year. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.1%. Since the same quarter one year prior, revenues rose by 22.4%. 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 Real Estate Investment Trusts (REITs) industry. The net income increased by 69.8% when compared to the same quarter one year prior, rising from -$60.29 million to -$18.24 million.
  • 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.
  • 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RAIT FINANCIAL TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for RAIT FINANCIAL TRUST is rather low; currently it is at 16.88%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -22.57% 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.

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