What To Hold: 3 Hold-Rated Dividend Stocks SXCP, PNNT, NRT

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."

SunCoke Energy Partners

Dividend Yield: 10.30%

SunCoke Energy Partners (NYSE: SXCP) shares currently have a dividend yield of 10.30%.

SunCoke Energy Partners, L.P., a master limited partnership, manufactures and sells coke used in the blast furnace production of steel in the United States. The company operates through Domestic Coke and Coke Logistics segments. The company has a P/E ratio of 15.16.

The average volume for SunCoke Energy Partners has been 142,800 shares per day over the past 30 days. SunCoke Energy Partners has a market cap of $521.7 million and is part of the metals & mining industry. Shares are down 16.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates SunCoke Energy Partners as a hold. The company's strengths can be seen in multiple areas, such as its 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 also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 103.42% to $29.70 million when compared to the same quarter last year. In addition, SUNCOKE ENERGY PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -40.50%.
  • SXCP's debt-to-equity ratio of 0.96 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that SXCP's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.60 is high and demonstrates strong liquidity.
  • Despite the weak revenue results, SXCP has outperformed against the industry average of 18.4%. Since the same quarter one year prior, revenues slightly dropped by 5.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 Metals & Mining industry and the overall market on the basis of return on equity, SUNCOKE ENERGY PARTNERS LP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The share price of SUNCOKE ENERGY PARTNERS LP has not done very well: it is down 24.73% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.

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Pennant Park Investment Corporation

Dividend Yield: 11.90%

Pennant Park Investment Corporation (NASDAQ: PNNT) shares currently have a dividend yield of 11.90%.

PennantPark Investment Corporation is a publicly listed business development firm specializing in direct and mezzanine investments in middle market companies. It invests in the form of mezzanine debt, senior secured loans, and equity investments. The company has a P/E ratio of 5.67.

The average volume for Pennant Park Investment Corporation has been 470,700 shares per day over the past 30 days. Pennant Park Investment Corporation has a market cap of $707.4 million and is part of the financial services industry. Shares are down 2.1% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Pennant Park Investment Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins 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 a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • PNNT's revenue growth has slightly outpaced the industry average of 4.4%. Since the same quarter one year prior, revenues rose by 13.8%. 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 gross profit margin for PENNANTPARK INVESTMENT CORP is rather high; currently it is at 66.30%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -61.07% is in-line with the industry average.
  • Net operating cash flow has increased to -$61.84 million or 40.57% when compared to the same quarter last year. Despite an increase in cash flow of 40.57%, PENNANTPARK INVESTMENT CORP is still growing at a significantly lower rate than the industry average of 141.93%.
  • 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 160.7% when compared to the same quarter one year ago, falling from $39.46 million to -$23.95 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, PENNANTPARK INVESTMENT CORP's return on equity is below that of both the industry average and the S&P 500.

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North European Oil Royalty

Dividend Yield: 9.90%

North European Oil Royalty (NYSE: NRT) shares currently have a dividend yield of 9.90%.

North European Oil Royalty Trust, a grantor trust, holds overriding royalty rights covering gas and oil production in concessions or leases in the Federal Republic of Germany. It holds these rights under contracts with German exploration and development subsidiaries of ExxonMobil Corp. The company has a P/E ratio of 8.06.

The average volume for North European Oil Royalty has been 22,600 shares per day over the past 30 days. North European Oil Royalty has a market cap of $129.6 million and is part of the financial services industry. Shares are up 13.5% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates North European Oil Royalty 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, expanding profit margins and notable return on equity. 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 a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • NRT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.02, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for NORTH EUROPEAN OIL RTY TR is currently very high, coming in at 100.00%. NRT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, NRT's net profit margin of 89.95% significantly outperformed against the industry.
  • NRT, with its decline in revenue, slightly underperformed the industry average of 33.1%. Since the same quarter one year prior, revenues fell by 35.0%. 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 41.35%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 35.18% 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.
  • NORTH EUROPEAN OIL RTY TR's earnings per share declined by 35.2% 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. During the past fiscal year, NORTH EUROPEAN OIL RTY TR reported lower earnings of $1.97 versus $2.26 in the prior year.

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