What To Hold: 3 Hold-Rated Dividend Stocks BTE, LGCY, BXMT

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."

Baytex Energy

Dividend Yield: 9.70%

Baytex Energy (NYSE: BTE) shares currently have a dividend yield of 9.70%.

Baytex Energy Corp., an oil and gas company, is engaged in the acquisition, development, and production of oil and natural gas in the Western Canadian Sedimentary Basin and the United States. The company offers heavy oil, light oil, and natural gas liquids. The company has a P/E ratio of 16.25.

The average volume for Baytex Energy has been 589,200 shares per day over the past 30 days. Baytex Energy has a market cap of $4.5 billion and is part of the energy industry. Shares are down 33.4% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Baytex Energy as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 6.4%. Since the same quarter one year prior, revenues rose by 42.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for BAYTEX ENERGY CORP is currently very high, coming in at 71.79%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 29.85% significantly outperformed against the industry average.
  • The debt-to-equity ratio is somewhat low, currently at 0.70, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that BTE's debt-to-equity ratio is low, the quick ratio, which is currently 0.50, displays a potential problem in covering short-term cash needs.
  • BTE's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 30.36%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, BAYTEX ENERGY CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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Legacy Reserves

Dividend Yield: 12.40%

Legacy Reserves (NASDAQ: LGCY) shares currently have a dividend yield of 12.40%.

Legacy Reserves LP owns and operates oil and natural gas properties in the United States.

The average volume for Legacy Reserves has been 541,900 shares per day over the past 30 days. Legacy Reserves has a market cap of $1.4 billion and is part of the energy industry. Shares are down 31.4% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Legacy Reserves as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and increase in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • LGCY's very impressive revenue growth greatly exceeded the industry average of 6.4%. Since the same quarter one year prior, revenues leaped by 94.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for LEGACY RESERVES LP is rather high; currently it is at 66.93%. It has increased significantly from the same period last year. Along with this, the net profit margin of 31.02% significantly outperformed against the industry average.
  • LEGACY RESERVES 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, LEGACY RESERVES LP swung to a loss, reporting -$0.62 versus $1.43 in the prior year. This year, the market expects an improvement in earnings ($0.86 versus -$0.62).
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, LEGACY RESERVES LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has declined marginally to $70.84 million or 9.90% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, LEGACY RESERVES LP has marginally lower results.

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Blackstone Mortgage

Dividend Yield: 7.00%

Blackstone Mortgage (NYSE: BXMT) shares currently have a dividend yield of 7.00%.

Blackstone Mortgage Trust, Inc., a real estate finance company, primarily focuses on originating mortgage loans backed by commercial real estate assets. The company operates through Loan Origination and CT Legacy Portfolio segments. The company has a P/E ratio of 15.84.

The average volume for Blackstone Mortgage has been 462,400 shares per day over the past 30 days. Blackstone Mortgage has a market cap of $1.6 billion and is part of the real estate industry. Shares are up 4.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Blackstone Mortgage as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and good cash flow from operations. 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:
  • BXMT's very impressive revenue growth greatly exceeded the industry average of 13.8%. Since the same quarter one year prior, revenues leaped by 167.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
  • BLACKSTONE MORTGAGE TR INC 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, BLACKSTONE MORTGAGE TR INC swung to a loss, reporting -$0.25 versus $73.00 in the prior year. This year, the market expects an improvement in earnings ($1.88 versus -$0.25).
  • 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, BLACKSTONE MORTGAGE TR INC's return on equity is below 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.

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