What To Hold: 3 Hold-Rated Dividend Stocks CMO, SPLS, CMLP

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."

Capstead Mortgage

Dividend Yield: 10.40%

Capstead Mortgage (NYSE: CMO) shares currently have a dividend yield of 10.40%.

Capstead Mortgage Corporation operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 10.17.

The average volume for Capstead Mortgage has been 839,800 shares per day over the past 30 days. Capstead Mortgage has a market cap of $1.3 billion and is part of the real estate industry. Shares are up 8.9% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Capstead Mortgage as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • CMO's revenue growth has slightly outpaced the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 10.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has slightly increased to $64.50 million or 1.62% when compared to the same quarter last year. Despite an increase in cash flow, CAPSTEAD MORTGAGE CORP's cash flow growth rate is still lower than the industry average growth rate of 15.06%.
  • CAPSTEAD MORTGAGE 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, CAPSTEAD MORTGAGE CORP reported lower earnings of $0.93 versus $1.50 in the prior year. This year, the market expects an improvement in earnings ($1.42 versus $0.93).
  • 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, CAPSTEAD MORTGAGE CORP's return on equity is below that of both the industry average and the S&P 500.

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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 12.35.

The average volume for Staples has been 9,307,400 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 26.6% year-to-date as of the close of trading on Thursday.

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

Highlights from the ratings report include:
  • 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. Despite the fact that SPLS's debt-to-equity ratio is low, the quick ratio, which is currently 0.64, displays a potential problem in covering short-term cash needs.
  • SPLS, with its decline in revenue, slightly underperformed the industry average of 0.6%. Since the same quarter one year prior, revenues slightly dropped by 1.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The gross profit margin for STAPLES INC is currently lower than what is desirable, coming in at 27.02%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.56% trails that of the industry average.
  • Net operating cash flow has significantly decreased to -$56.27 million or 1406725.00% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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Crestwood Midstream Partners

Dividend Yield: 7.10%

Crestwood Midstream Partners (NYSE: CMLP) shares currently have a dividend yield of 7.10%.

Crestwood Midstream Partners LP is engaged in the gathering, processing, treating, compression, storage, and transportation of natural gas; storage and transportation of natural gas liquids (NGLs); and gathering, storage, and terminalling of crude oil in the United States.

The average volume for Crestwood Midstream Partners has been 720,500 shares per day over the past 30 days. Crestwood Midstream Partners has a market cap of $4.4 billion and is part of the energy industry. Shares are down 7.1% year-to-date as of the close of trading on Thursday.

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

TheStreet Ratings rates Crestwood Midstream Partners as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • CMLP's very impressive revenue growth greatly exceeded the industry average of 2.4%. Since the same quarter one year prior, revenues leaped by 850.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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 64.3% when compared to the same quarter one year prior, rising from $4.87 million to $8.00 million.
  • CRESTWOOD MIDSTREAM PTNRS 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, CRESTWOOD MIDSTREAM PTNRS LP swung to a loss, reporting -$0.38 versus $0.35 in the prior year. This year, the market expects an improvement in earnings ($0.21 versus -$0.38).
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, CRESTWOOD MIDSTREAM PTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for CRESTWOOD MIDSTREAM PTNRS LP is rather low; currently it is at 15.18%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 1.18% 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.

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