3 Hold-Rated Dividend Stocks: PMT, DHT, RCI

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."

PennyMac Mortgage Investment

Dividend Yield: 11.70%

PennyMac Mortgage Investment (NYSE: PMT) shares currently have a dividend yield of 11.70%.

PennyMac Mortgage Investment Trust, a specialty finance company, invests primarily in residential mortgage loans and mortgage-related assets in the United States. The company operates through two segments, Correspondent Production and Investment Activities. The company has a P/E ratio of 8.47.

The average volume for PennyMac Mortgage Investment has been 486,800 shares per day over the past 30 days. PennyMac Mortgage Investment has a market cap of $1.6 billion and is part of the real estate industry. Shares are down 0.8% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates PennyMac Mortgage Investment as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and disappointing return on equity.

Highlights from the ratings report include:
  • The gross profit margin for PENNYMAC MORTGAGE INVEST TR is rather high; currently it is at 56.82%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, PMT's net profit margin of 35.35% compares favorably to the industry average.
  • The revenue fell significantly faster than the industry average of 9.8%. Since the same quarter one year prior, revenues fell by 35.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Net operating cash flow has significantly decreased to $17.36 million or 90.83% 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.
  • 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 49.7% when compared to the same quarter one year ago, falling from $52.70 million to $26.51 million.

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DHT Holdings

Dividend Yield: 7.30%

DHT Holdings (NYSE: DHT) shares currently have a dividend yield of 7.30%.

DHT Holdings, Inc. operates crude oil tankers in Bermuda. As of March 10, 2015, its fleet consisted of 18 crude oil tankers, including 14 very large crude carriers, 2 Suezmax tankers, and 2 Aframax tankers. The company was incorporated in 2005 and is headquartered in Hamilton, Bermuda. The company has a P/E ratio of 15.51.

The average volume for DHT Holdings has been 1,531,400 shares per day over the past 30 days. DHT Holdings has a market cap of $763.2 million and is part of the transportation industry. Shares are up 12.4% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates DHT Holdings as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the stock has experienced relatively poor performance when compared with the S&P 500 during the past year.

Highlights from the ratings report include:
  • DHT's very impressive revenue growth greatly exceeded the industry average of 33.1%. Since the same quarter one year prior, revenues leaped by 290.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • DHT HOLDINGS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, DHT HOLDINGS INC turned its bottom line around by earning $0.08 versus -$0.52 in the prior year. This year, the market expects an improvement in earnings ($0.55 versus $0.08).
  • DHT's debt-to-equity ratio of 0.94 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. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.47 is very high and demonstrates very strong liquidity.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, DHT HOLDINGS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • In its most recent trading session, DHT has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.

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Rogers Communications

Dividend Yield: 4.50%

Rogers Communications (NYSE: RCI) shares currently have a dividend yield of 4.50%.

Rogers Communications Inc. operates as a communications and media company in Canada. The company's Wireless segment offers wireless telecommunications services to consumers and businesses under the Rogers, Fido, and chatr brands; and wireless devices, services, and applications. The company has a P/E ratio of 12.07.

The average volume for Rogers Communications has been 505,000 shares per day over the past 30 days. Rogers Communications has a market cap of $14.2 billion and is part of the telecommunications industry. Shares are down 9% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Rogers Communications as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, 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 generally higher debt management risk.

Highlights from the ratings report include:
  • The revenue growth significantly trails the industry average of 66.8%. Since the same quarter one year prior, revenues slightly increased by 5.1%. 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.
  • 35.62% is the gross profit margin for ROGERS COMMUNICATIONS which we consider to be strong. Regardless of RCI'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 8.03% trails the industry average.
  • The debt-to-equity ratio is very high at 3.04 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.38, which clearly demonstrates the inability to cover short-term cash needs.
  • Net operating cash flow has decreased to $227.00 million or 44.36% 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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