3 Hold-Rated Dividend Stocks: CPTA, AMID, UAN

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."

Capitala Finance

Dividend Yield: 10.90%

Capitala Finance (NASDAQ: CPTA) shares currently have a dividend yield of 10.90%.

Capitala Finance Corp. is a Business Development Company specializing in investments in traditional mezzanine, senior subordinated and unitranche debt, second-lien loans, equity securities issued by lower and traditional middle-market companies, and small and middle-market companies. The company has a P/E ratio of 15.46.

The average volume for Capitala Finance has been 117,500 shares per day over the past 30 days. Capitala Finance has a market cap of $285.2 million and is part of the financial services industry. Shares are down 3.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Capitala Finance 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 deteriorating net income, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • CPTA's revenue growth has slightly outpaced the industry average of 5.6%. Since the same quarter one year prior, revenues rose by 10.8%. 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 CAPITALA FINANCE CORP is currently very high, coming in at 71.12%. 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 -83.05% is in-line with the industry average.
  • Compared to other companies in the Capital Markets industry and the overall market, CAPITALA FINANCE CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$44.53 million or 85.12% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much 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 Capital Markets industry. The net income has significantly decreased by 264.5% when compared to the same quarter one year ago, falling from $6.80 million to -$11.18 million.

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American Midstream Partners

Dividend Yield: 10.50%

American Midstream Partners (NYSE: AMID) shares currently have a dividend yield of 10.50%.

American Midstream Partners, LP engages in gathering, treating, processing, and transporting natural gas, fractionating natural gas liquids (NGLs), and storing specialty chemical products in the Gulf Coast and Southeast regions of the United States.

The average volume for American Midstream Partners has been 56,300 shares per day over the past 30 days. American Midstream Partners has a market cap of $410.1 million and is part of the energy industry. Shares are down 9.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates American Midstream Partners as a hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and poor profit margins.

Highlights from the ratings report include:
  • AMERICAN MIDSTREAM PRTNRS LP has improved earnings per share by 47.2% 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, AMERICAN MIDSTREAM PRTNRS LP continued to lose money by earning -$6.47 versus -$6.63 in the prior year. This year, the market expects an improvement in earnings ($0.55 versus -$6.47).
  • 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 106.5% when compared to the same quarter one year prior, rising from $0.40 million to $0.83 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.88, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.16 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • AMID's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 35.79%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, AMERICAN MIDSTREAM PRTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.

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CVR Partners

Dividend Yield: 12.60%

CVR Partners (NYSE: UAN) shares currently have a dividend yield of 12.60%.

CVR Partners, LP produces, distributes, and markets nitrogen fertilizer products in North America. It provides ammonia products for industrial and agricultural customers; and urea ammonium nitrate (UAN) products for agricultural customers. The company has a P/E ratio of 12.34.

The average volume for CVR Partners has been 223,400 shares per day over the past 30 days. CVR Partners has a market cap of $1.0 billion and is part of the chemicals industry. Shares are up 45.7% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates CVR Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, 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 weak operating cash flow, 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 14.0%. Since the same quarter one year prior, revenues rose by 15.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.30, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 2.90, which clearly demonstrates the ability to cover short-term cash needs.
  • 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 Chemicals industry and the overall market on the basis of return on equity, CVR PARTNERS LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Net operating cash flow has decreased to $25.37 million or 28.75% 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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