What To Hold: 3 Hold-Rated Dividend Stocks NTI, DRI, ATLS

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."

Northern Tier Energy

Dividend Yield: 8.60%

Northern Tier Energy (NYSE: NTI) shares currently have a dividend yield of 8.60%.

Northern Tier Energy LP, an independent downstream energy company, is engaged in refining, retail, and pipeline operations in the United States. It operates through two segments, Refining and Retail. The company has a P/E ratio of 12.83.

The average volume for Northern Tier Energy has been 505,800 shares per day over the past 30 days. Northern Tier Energy has a market cap of $2.3 billion and is part of the energy industry. Shares are down 0.4% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Northern Tier Energy as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 41.4%. 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.
  • Compared to its closing price of one year ago, NTI's share price has jumped by 27.60%, exceeding the performance of the broader market during that same time frame. 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.
  • NORTHERN TIER ENERGY LP's earnings per share declined by 11.4% 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, NORTHERN TIER ENERGY LP increased its bottom line by earning $2.52 versus $2.14 in the prior year. This year, the market expects an improvement in earnings ($3.15 versus $2.52).
  • The gross profit margin for NORTHERN TIER ENERGY LP is currently extremely low, coming in at 6.95%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.86% trails that of the industry average.
  • Net operating cash flow has decreased to $62.80 million or 23.97% 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.

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

Darden Restaurants

Dividend Yield: 4.40%

Darden Restaurants (NYSE: DRI) shares currently have a dividend yield of 4.40%.

Darden Restaurants, Inc. owns and operates full service restaurants in the United States and Canada. It operates restaurants under the Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, The Capital Grille, Eddie V's, and Yard House brand names. The company has a P/E ratio of 54.28.

The average volume for Darden Restaurants has been 1,766,800 shares per day over the past 30 days. Darden Restaurants has a market cap of $6.6 billion and is part of the leisure industry. Shares are down 8.9% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Darden Restaurants as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • DRI's revenue growth has slightly outpaced the industry average of 5.7%. Since the same quarter one year prior, revenues slightly increased by 4.2%. 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 0.76, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.32 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • DARDEN RESTAURANTS INC 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 two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, DARDEN RESTAURANTS INC reported lower earnings of $1.38 versus $1.80 in the prior year. This year, the market expects an improvement in earnings ($2.25 versus $1.38).
  • The gross profit margin for DARDEN RESTAURANTS INC is rather low; currently it is at 19.63%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.20% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to $44.60 million or 79.44% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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

Atlas Energy

Dividend Yield: 4.50%

Atlas Energy (NYSE: ATLS) shares currently have a dividend yield of 4.50%.

Atlas Energy, L.P. develops and produces natural gas, crude oil, and natural gas liquids (NGLs) in basins across the United States. It also sponsors and manages tax-advantaged investment partnerships.

The average volume for Atlas Energy has been 395,700 shares per day over the past 30 days. Atlas Energy has a market cap of $2.3 billion and is part of the energy industry. Shares are down 4.7% 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 Atlas Energy as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 32.5%. 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.
  • Net operating cash flow has significantly increased by 121.89% to $13.67 million when compared to the same quarter last year. In addition, ATLAS ENERGY LP has also vastly surpassed the industry average cash flow growth rate of -5.07%.
  • ATLAS ENERGY LP's earnings per share declined by 18.8% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ATLAS ENERGY LP reported poor results of -$1.48 versus -$1.02 in the prior year. This year, the market expects an improvement in earnings (-$1.05 versus -$1.48).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ATLAS ENERGY LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ATLAS ENERGY LP is rather low; currently it is at 21.11%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.17% 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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