What To Hold: 3 Hold-Rated Dividend Stocks OFC, PEGI, BBEP

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."

Corporate Office Properties

Dividend Yield: 4.10%

Corporate Office Properties (NYSE: OFC) shares currently have a dividend yield of 4.10%.

Corporate Office Properties Trust, a real estate investment trust (REIT), engages in the acquisition, development, ownership, management, and leasing of suburban office properties. The company has a P/E ratio of 75.91.

The average volume for Corporate Office Properties has been 838,700 shares per day over the past 30 days. Corporate Office Properties has a market cap of $2.5 billion and is part of the real estate industry. Shares are down 6.8% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Corporate Office Properties as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and poor profit margins.

Highlights from the ratings report include:
  • OFC's revenue growth has slightly outpaced the industry average of 8.4%. Since the same quarter one year prior, revenues slightly increased by 9.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • CORP OFFICE PPTYS TR INC has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. 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, CORP OFFICE PPTYS TR INC increased its bottom line by earning $0.25 versus $0.22 in the prior year. This year, the market expects an improvement in earnings ($0.77 versus $0.25).
  • Net operating cash flow has decreased to $41.89 million or 18.72% 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.
  • This stock has managed to decline in share value by 2.93% over the past twelve months. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

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Pattern Energy Group

Dividend Yield: 4.90%

Pattern Energy Group (NASDAQ: PEGI) shares currently have a dividend yield of 4.90%.

Pattern Energy Group Inc., an independent power company, owns and operates power projects in the United States, Canada, and Chile. As of March 2, 2015, the company owned interests in 12 wind power projects with the capacity of 1,636 megawatts. It sells electricity primarily to local utilities.

The average volume for Pattern Energy Group has been 501,000 shares per day over the past 30 days. Pattern Energy Group has a market cap of $2.0 billion and is part of the utilities industry. Shares are up 15% year-to-date as of the close of trading on Thursday.

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

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 15.0%. Since the same quarter one year prior, revenues rose by 30.9%. 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.
  • Compared to other companies in the Independent Power Producers & Energy Traders industry and the overall market, PATTERN ENERGY GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for PATTERN ENERGY GROUP INC is rather high; currently it is at 61.08%. Regardless of PEGI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PEGI's net profit margin of -30.67% significantly underperformed when compared to the industry average.
  • Net operating cash flow has declined marginally to $16.24 million or 1.01% when compared to the same quarter last year. Despite a decrease in cash flow PATTERN ENERGY GROUP INC is still fairing well by exceeding its industry average cash flow growth rate of -39.74%.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, PEGI has underperformed the S&P 500 Index, declining 6.22% 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.

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BreitBurn Energy Partners

Dividend Yield: 8.80%

BreitBurn Energy Partners (NASDAQ: BBEP) shares currently have a dividend yield of 8.80%.

Breitburn Energy Partners LP, an independent oil and gas partnership, acquires, exploits, and develops oil, natural gas liquids (NGLs), and natural gas properties in the United States. The company has a P/E ratio of 2.03.

The average volume for BreitBurn Energy Partners has been 2,269,200 shares per day over the past 30 days. BreitBurn Energy Partners has a market cap of $1.2 billion and is part of the energy industry. Shares are down 18.4% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates BreitBurn Energy Partners as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • BBEP's very impressive revenue growth greatly exceeded the industry average of 38.3%. Since the same quarter one year prior, revenues leaped by 65.6%. 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 debt-to-equity ratio is somewhat low, currently at 0.93, 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 BBEP's debt-to-equity ratio is low, the quick ratio, which is currently 0.61, displays a potential problem in covering short-term cash needs.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 70.60%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 262.50% 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 502.8% when compared to the same quarter one year ago, falling from -$9.76 million to -$58.83 million.

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