What To Hold: 3 Hold-Rated Dividend Stocks SRC, HLSS, WYNN

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

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."

Spirit Realty Capital

Dividend Yield: 5.50%

Spirit Realty Capital (NYSE: SRC) shares currently have a dividend yield of 5.50%.

Spirit Realty Capital, Inc is a publicly traded real estate investment trust.

The average volume for Spirit Realty Capital has been 4,687,800 shares per day over the past 30 days. Spirit Realty Capital has a market cap of $5.1 billion and is part of the real estate industry. Shares are up 2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Spirit Realty Capital as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • SRC's revenue growth has slightly outpaced the industry average of 9.9%. Since the same quarter one year prior, revenues rose by 11.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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.
  • The gross profit margin for SPIRIT REALTY CAPITAL INC is rather high; currently it is at 51.22%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, SRC's net profit margin of 22.03% significantly trails 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 decreased by 21.7% when compared to the same quarter one year ago, dropping from $43.59 million to $34.11 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 Real Estate Investment Trusts (REITs) industry and the overall market, SPIRIT REALTY CAPITAL INC's return on equity significantly trails that of both the industry average and the S&P 500.

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Home Loan Servicing Solutions

Dividend Yield: 12.40%

Home Loan Servicing Solutions (NASDAQ: HLSS) shares currently have a dividend yield of 12.40%.

Home Loan Servicing Solutions, Ltd., through its subsidiaries, engages in the acquisition of mortgage servicing assets. Its mortgage servicing assets consists of servicing advances, mortgage servicing rights, rights to mortgage servicing rights, and other related assets. The company has a P/E ratio of 5.69.

The average volume for Home Loan Servicing Solutions has been 3,636,500 shares per day over the past 30 days. Home Loan Servicing Solutions has a market cap of $1.2 billion and is part of the real estate industry. Shares are down 11.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Home Loan Servicing Solutions as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 5.5%. Since the same quarter one year prior, revenues rose by 22.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 Thrifts & Mortgage Finance industry and the overall market, HOME LOAN SERVICING SOLTNS's return on equity exceeds that of both the industry average and the S&P 500.
  • HLSS has underperformed the S&P 500 Index, declining 21.94% from its price level of one year ago. 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.
  • Net operating cash flow has decreased to $105.36 million or 34.53% when compared to the same quarter last year. Despite a decrease in cash flow of 34.53%, HOME LOAN SERVICING SOLTNS is still significantly exceeding the industry average of -126.28%.

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Wynn Resorts

Dividend Yield: 4.60%

Wynn Resorts (NASDAQ: WYNN) shares currently have a dividend yield of 4.60%.

Wynn Resorts, Limited, together with its subsidiaries, develops, owns, and operates destination casino resorts. It operates in two segments, Macau Operations and Las Vegas Operations. The company operates Wynn Macau and Encore at Wynn Macau resort located in the People's Republic of China. The company has a P/E ratio of 18.21.

The average volume for Wynn Resorts has been 2,130,400 shares per day over the past 30 days. Wynn Resorts has a market cap of $13.3 billion and is part of the leisure industry. Shares are down 14% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Wynn Resorts 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 unimpressive growth in net income, weak operating cash flow and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • 38.51% is the gross profit margin for WYNN RESORTS LTD which we consider to be strong. Regardless of WYNN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.60% trails the industry average.
  • WYNN, with its decline in revenue, underperformed when compared the industry average of 6.7%. Since the same quarter one year prior, revenues fell by 25.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 44.75%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 49.04% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • 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 Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 48.9% when compared to the same quarter one year ago, falling from $213.88 million to $109.35 million.
  • Net operating cash flow has significantly decreased to $124.19 million or 68.58% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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