What To Hold: 3 Hold-Rated Dividend Stocks APTS, NGPC, 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: 7.30%

Preferred Apartment Communities (AMEX: APTS) shares currently have a dividend yield of 7.30%.

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 10.54.

The average volume for Preferred Apartment Communities has been 92,100 shares per day over the past 30 days. Preferred Apartment Communities has a market cap of $150.0 million and is part of the real estate industry. Shares are up 8.8% 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 company's return on equity has been disappointing.

Highlights from the ratings report include:
  • APTS's very impressive revenue growth greatly exceeded the industry average of 10.6%. 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.
  • 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.
  • 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 -$2.00 versus -$0.17 in the prior year. This year, the market expects an improvement in earnings ($0.09 versus -$2.00).
  • 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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NGP Capital Resources Company

Dividend Yield: 9.80%

NGP Capital Resources Company (NASDAQ: NGPC) shares currently have a dividend yield of 9.80%.

NGP Capital Resources Company is a business development company specializing in investments in small and mid size and middle market companies. The company has a P/E ratio of 81.25.

The average volume for NGP Capital Resources Company has been 145,600 shares per day over the past 30 days. NGP Capital Resources Company has a market cap of $133.2 million and is part of the financial services industry. Shares are down 13% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates NGP Capital Resources Company 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 a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • The revenue fell significantly faster than the industry average of 3.0%. Since the same quarter one year prior, revenues fell by 42.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for NGP CAPITAL RESOURCES CO is rather high; currently it is at 51.57%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, NGPC's net profit margin of -0.58% significantly underperformed when compared to the industry average.
  • NGP CAPITAL RESOURCES CO 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. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, NGP CAPITAL RESOURCES CO reported lower earnings of $0.19 versus $0.80 in the prior year. This year, the market expects an improvement in earnings ($0.43 versus $0.19).
  • 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 100.9% when compared to the same quarter one year ago, falling from $3.51 million to -$0.03 million.
  • 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. Compared to other companies in the Capital Markets industry and the overall market, NGP CAPITAL RESOURCES CO's return on equity significantly trails 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.

Rait Financial

Dividend Yield: 8.80%

Rait Financial (NYSE: RAS) shares currently have a dividend yield of 8.80%.

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 567,800 shares per day over the past 30 days. Rait Financial has a market cap of $672.5 million and is part of the real estate industry. Shares are down 10% year-to-date as of the close of trading on Tuesday.

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 Rait Financial as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and compelling growth in net income. 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 10.6%. 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 strong earnings growth this company has enjoyed -- up -- has apparently played a role in driving up its share price by a solid 25.27%. In addition, the rise in the general market has likely contributed to this stock's strong performance during this past year.Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • RAIT FINANCIAL TRUST 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, RAIT FINANCIAL TRUST reported poor results of -$4.58 versus -$3.92 in the prior year. This year, the market expects an improvement in earnings (-$0.28 versus -$4.58).
  • 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 currently lower than what is desirable, coming in at 33.27%. It has decreased from the same quarter the previous 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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