What To Hold: 3 Hold-Rated Dividend Stocks DOC, AINV, STO

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."

Physicians Realty

Dividend Yield: 5.30%

Physicians Realty (NYSE: DOC) shares currently have a dividend yield of 5.30%.

Physicians Realty Trust, a self-managed healthcare real estate company, focuses on the acquisition, development, ownership, and management of healthcare properties that are leased to physicians, hospitals, and healthcare delivery systems.

The average volume for Physicians Realty has been 593,300 shares per day over the past 30 days. Physicians Realty has a market cap of $1.2 billion and is part of the real estate industry. Shares are up 2.4% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Physicians Realty as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and increase in net income. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.

Highlights from the ratings report include:
  • DOC's very impressive revenue growth greatly exceeded the industry average of 9.4%. Since the same quarter one year prior, revenues leaped by 205.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Powered by its strong earnings growth of 200.00% and other important driving factors, this stock has surged by 31.53% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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.
  • PHYSICIANS REALTY TR 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, PHYSICIANS REALTY TR reported poor results of -$0.19 versus -$0.11 in the prior year. This year, the market expects an improvement in earnings ($0.36 versus -$0.19).
  • Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, PHYSICIANS REALTY TR's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for PHYSICIANS REALTY TR is rather low; currently it is at 20.45%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, DOC's net profit margin of 8.68% is significantly lower than the industry average.

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Apollo Investment

Dividend Yield: 10.10%

Apollo Investment (NASDAQ: AINV) shares currently have a dividend yield of 10.10%.

Apollo Investment Corporation is business development company and operates as a closed-end management investment company. The company invests in middle market companies. It provides direct equity capital, mezzanine and senior secured loans, and subordinated debt and loans. The company has a P/E ratio of 6.68.

The average volume for Apollo Investment has been 1,546,000 shares per day over the past 30 days. Apollo Investment has a market cap of $1.9 billion and is part of the financial services industry. Shares are up 7.2% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Apollo Investment as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, 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:
  • The revenue growth came in higher than the industry average of 4.6%. Since the same quarter one year prior, revenues rose by 16.4%. 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.
  • Net operating cash flow has significantly increased by 139.87% to $48.91 million when compared to the same quarter last year. In addition, APOLLO INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of 55.98%.
  • The gross profit margin for APOLLO INVESTMENT CORP is rather high; currently it is at 69.96%. Regardless of AINV's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AINV's net profit margin of -17.67% 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 Capital Markets industry. The net income has significantly decreased by 118.4% when compared to the same quarter one year ago, falling from $105.74 million to -$19.45 million.
  • 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. When compared to other companies in the Capital Markets industry and the overall market, APOLLO INVESTMENT CORP's return on equity is below that of both the industry average and the S&P 500.

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Statoil ASA

Dividend Yield: 4.60%

Statoil ASA (NYSE: STO) shares currently have a dividend yield of 4.60%.

Statoil ASA, an energy company, engages in the exploration, production, transportation, refining, and marketing of petroleum and petroleum-derived products in Norway and internationally. The company has a P/E ratio of 6.78.

The average volume for Statoil ASA has been 2,990,700 shares per day over the past 30 days. Statoil ASA has a market cap of $65.3 billion and is part of the energy industry. Shares are up 16.2% year-to-date as of the close of trading on Thursday.

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

Highlights from the ratings report include:
  • The current debt-to-equity ratio, 0.57, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.26, which illustrates the ability to avoid short-term cash problems.
  • 40.18% is the gross profit margin for STATOIL ASA which we consider to be strong. Regardless of STO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, STO's net profit margin of -19.19% significantly underperformed when compared to the industry average.
  • 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, STATOIL ASA's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has decreased to $1,513.02 million or 33.51% 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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