3 Hold-Rated Dividend Stocks: RGP, MFA, CY

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."

Regency Energy Partners

Dividend Yield: 6.10%

Regency Energy Partners (NYSE: RGP) shares currently have a dividend yield of 6.10%.

Regency Energy Partners LP is engaged in the gathering and processing, compression, treating, and transportation of natural gas; and the transportation, fractionation, and storage of natural gas liquids (NGLs). The company has a P/E ratio of 358.11.

The average volume for Regency Energy Partners has been 785,300 shares per day over the past 30 days. Regency Energy Partners has a market cap of $12.8 billion and is part of the energy industry. Shares are up 19.8% year-to-date as of the close of trading on Friday.

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

Highlights from the ratings report include:
  • RGP's very impressive revenue growth greatly exceeded the industry average of 3.5%. Since the same quarter one year prior, revenues leaped by 84.3%. 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.61, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.71 is somewhat weak and could be cause for future problems.
  • Net operating cash flow has decreased to $90.00 million or 29.68% 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.
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 180.0% when compared to the same quarter one year ago, falling from $10.00 million to -$8.00 million.

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MFA Financial

Dividend Yield: 9.60%

MFA Financial (NYSE: MFA) shares currently have a dividend yield of 9.60%.

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 34.79.

The average volume for MFA Financial has been 1,873,500 shares per day over the past 30 days. MFA Financial has a market cap of $3.1 billion and is part of the real estate industry. Shares are up 14.6% year-to-date as of the close of trading on Friday.

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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, weak operating cash flow 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 10.6%. 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 stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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 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.
  • Net operating cash flow has declined marginally to $66.70 million or 4.82% 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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Cypress Semiconductor

Dividend Yield: 4.10%

Cypress Semiconductor (NASDAQ: CY) shares currently have a dividend yield of 4.10%.

Cypress Semiconductor Corporation provides mixed-signal programmable solutions, specialized semiconductor memories, and integrated semiconductor solutions.

The average volume for Cypress Semiconductor has been 1,943,500 shares per day over the past 30 days. Cypress Semiconductor has a market cap of $1.7 billion and is part of the electronics industry. Shares are down 1.1% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Cypress Semiconductor as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk 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 Semiconductors & Semiconductor Equipment industry. The net income increased by 190.8% when compared to the same quarter one year prior, rising from $3.28 million to $9.53 million.
  • Net operating cash flow has increased to $44.31 million or 45.96% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 7.77%.
  • CYPRESS SEMICONDUCTOR 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, CYPRESS SEMICONDUCTOR CORP reported poor results of -$0.33 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings ($0.54 versus -$0.33).
  • In its most recent trading session, CY 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. 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 debt-to-equity ratio of 1.38 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, CY has a quick ratio of 0.67, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

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