What To Hold: 3 Hold-Rated Dividend Stocks TLLP, DLR, NLY

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."

Tesoro Logistics

Dividend Yield: 4.90%

Tesoro Logistics (NYSE: TLLP) shares currently have a dividend yield of 4.90%.

Tesoro Logistics LP owns, operates, develops, and acquires logistics assets related to crude oil and refined products in the United States. It operates in three segments: Gathering, Processing, and Terminalling and Transportation. The company has a P/E ratio of 178.41.

The average volume for Tesoro Logistics has been 291,900 shares per day over the past 30 days. Tesoro Logistics has a market cap of $4.6 billion and is part of the energy industry. Shares are down 2.5% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Tesoro Logistics as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • TLLP's very impressive revenue growth greatly exceeded the industry average of 38.3%. Since the same quarter one year prior, revenues leaped by 110.3%. 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 TESORO LOGISTICS LP is rather high; currently it is at 68.06%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 24.33% significantly outperformed against the industry average.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 43.8% when compared to the same quarter one year prior, rising from $44.50 million to $64.00 million.
  • TESORO LOGISTICS LP's earnings per share declined by 8.7% 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, TESORO LOGISTICS LP reported lower earnings of $1.14 versus $1.45 in the prior year. This year, the market expects an improvement in earnings ($2.63 versus $1.14).
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, TLLP has underperformed the S&P 500 Index, declining 16.07% from its price level of one year ago. 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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Digital Realty

Dividend Yield: 5.10%

Digital Realty (NYSE: DLR) shares currently have a dividend yield of 5.10%.

Digital Realty Trust, Inc., a real estate investment trust (REIT), through its controlling interest in Digital Realty Trust, L.P., engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate. The company has a P/E ratio of 44.65.

The average volume for Digital Realty has been 946,500 shares per day over the past 30 days. Digital Realty has a market cap of $9.0 billion and is part of the real estate industry. Shares are down 0.5% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Digital Realty as a hold. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, increase in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • 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 net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 161.8% when compared to the same quarter one year prior, rising from $45.91 million to $120.18 million.
  • DIGITAL REALTY TRUST INC 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, DIGITAL REALTY TRUST INC reported lower earnings of $0.98 versus $2.10 in the prior year. This year, the market expects an improvement in earnings ($1.62 versus $0.98).
  • The gross profit margin for DIGITAL REALTY TRUST INC is currently lower than what is desirable, coming in at 26.90%. Regardless of DLR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, DLR's net profit margin of 29.38% compares favorably to the industry average.
  • 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, DIGITAL REALTY TRUST INC's return on equity is below that of both the industry average and the S&P 500.

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Annaly Capital Management

Dividend Yield: 11.80%

Annaly Capital Management (NYSE: NLY) shares currently have a dividend yield of 11.80%.

Annaly Capital Management, Inc. owns a portfolio of real estate related investments in the United States.

The average volume for Annaly Capital Management has been 7,965,600 shares per day over the past 30 days. Annaly Capital Management has a market cap of $9.7 billion and is part of the real estate industry. Shares are down 5.4% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Annaly Capital Management 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 deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • NLY, with its decline in revenue, underperformed when compared the industry average of 8.4%. Since the same quarter one year prior, revenues slightly dropped by 3.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for ANNALY CAPITAL MANAGEMENT is currently very high, coming in at 91.34%. Regardless of NLY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NLY's net profit margin of -80.97% significantly underperformed when compared to the industry average.
  • ANNALY CAPITAL MANAGEMENT has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ANNALY CAPITAL MANAGEMENT swung to a loss, reporting -$0.96 versus $3.72 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus -$0.96).
  • 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 134.3% when compared to the same quarter one year ago, falling from -$203.35 million to -$476.41 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ANNALY CAPITAL MANAGEMENT's return on equity significantly trails that of both the industry average and the S&P 500.

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