3 Hold-Rated Dividend Stocks: MAA, NLY, ERF

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."

Mid-America Apartment Communities

Dividend Yield: 4.30%

Mid-America Apartment Communities (NYSE: MAA) shares currently have a dividend yield of 4.30%.

Mid-America Apartment Communities, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in acquisition, redevelopment, new development, property management, and disposition of multifamily apartment communities. The company has a P/E ratio of 159.86.

The average volume for Mid-America Apartment Communities has been 414,900 shares per day over the past 30 days. Mid-America Apartment Communities has a market cap of $5.0 billion and is part of the real estate industry. Shares are up 9.4% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Mid-America 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 good cash flow from operations. 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:
  • MAA's very impressive revenue growth greatly exceeded the industry average of 11.6%. Since the same quarter one year prior, revenues leaped by 88.4%. 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.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, MID-AMERICA APT CMNTYS INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The gross profit margin for MID-AMERICA APT CMNTYS INC is currently lower than what is desirable, coming in at 26.33%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 12.72% significantly trails the industry average.

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Annaly Capital Management

Dividend Yield: 10.60%

Annaly Capital Management (NYSE: NLY) shares currently have a dividend yield of 10.60%.

Annaly Capital Management, Inc. owns a portfolio of real estate related investments in the United States. The company has a P/E ratio of 18.24.

The average volume for Annaly Capital Management has been 7,298,200 shares per day over the past 30 days. Annaly Capital Management has a market cap of $10.7 billion and is part of the real estate industry. Shares are up 12.7% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Annaly Capital Management as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 141.26% to $1,576.85 million when compared to the same quarter last year. In addition, ANNALY CAPITAL MANAGEMENT has also vastly surpassed the industry average cash flow growth rate of 18.92%.
  • The gross profit margin for ANNALY CAPITAL MANAGEMENT is currently very high, coming in at 92.07%. Regardless of NLY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NLY's net profit margin of -50.97% significantly underperformed when compared to the industry average.
  • 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 120.5% when compared to the same quarter one year ago, falling from $1,638.21 million to -$335.51 million.
  • 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ANNALY CAPITAL MANAGEMENT's return on equity is below that of both the industry average and the S&P 500.

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Enerplus

Dividend Yield: 5.30%

Enerplus (NYSE: ERF) shares currently have a dividend yield of 5.30%.

Enerplus Corporation, together with subsidiaries, is engaged in the exploration and development of crude oil and natural gas in the United States and Canada. The company has a P/E ratio of 37.96.

The average volume for Enerplus has been 598,900 shares per day over the past 30 days. Enerplus has a market cap of $3.8 billion and is part of the energy industry. Shares are up 3% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Enerplus as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive.

Highlights from the ratings report include:
  • ERF's revenue growth has slightly outpaced the industry average of 3.1%. Since the same quarter one year prior, revenues slightly increased by 4.7%. 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 increased to $228.51 million or 16.92% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -5.24%.
  • The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.39 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • 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. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • 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 decreased by 24.1% when compared to the same quarter one year ago, dropping from $52.62 million to $39.96 million.

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