3 Hold-Rated Dividend Stocks: DEST, AMTG, STON

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."

Destination Maternity

Dividend Yield: 8.00%

Destination Maternity (NASDAQ: DEST) shares currently have a dividend yield of 8.00%.

Destination Maternity Corporation designs and retails maternity apparel in the United States. The company has a P/E ratio of 13.03.

The average volume for Destination Maternity has been 77,400 shares per day over the past 30 days. Destination Maternity has a market cap of $139.0 million and is part of the retail industry. Shares are down 37.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Destination Maternity as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, 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 feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • DEST 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. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.30 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • 49.31% is the gross profit margin for DESTINATION MATERNITY CORP which we consider to be strong. Regardless of DEST'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 -2.03% trails the industry average.
  • 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. In comparison to the other companies in the Specialty Retail industry and the overall market, DESTINATION MATERNITY CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has significantly decreased to -$2.00 million or 323.48% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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Apollo Residential Mortgage

Dividend Yield: 12.20%

Apollo Residential Mortgage (NYSE: AMTG) shares currently have a dividend yield of 12.20%.

Apollo Residential Mortgage, Inc. primarily invests in residential mortgage assets in the United States. The company has a P/E ratio of 6.73.

The average volume for Apollo Residential Mortgage has been 192,200 shares per day over the past 30 days. Apollo Residential Mortgage has a market cap of $505.5 million and is part of the real estate industry. Shares are down 0.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Apollo Residential Mortgage as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and expanding profit margins. 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:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.4%. Since the same quarter one year prior, revenues slightly increased by 2.9%. 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.
  • The gross profit margin for APOLLO RESIDENTIAL MTG INC is currently very high, coming in at 83.11%. Regardless of AMTG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AMTG's net profit margin of 54.46% significantly outperformed against the industry.
  • In its most recent trading session, AMTG 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. 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.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income has decreased by 23.2% when compared to the same quarter one year ago, dropping from $27.88 million to $21.41 million.

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Stonemor Partners

Dividend Yield: 8.60%

Stonemor Partners (NYSE: STON) shares currently have a dividend yield of 8.60%.

StoneMor Partners L.P., together with its subsidiaries, owns and operates cemeteries in the United States. It operates through Cemetery Operations-Southeast, Cemetery Operations-Northeast, Cemetery Operations-West, and Funeral Homes segments.

The average volume for Stonemor Partners has been 120,800 shares per day over the past 30 days. Stonemor Partners has a market cap of $870.5 million and is part of the diversified services industry. Shares are up 16.4% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Stonemor Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 4.7%. 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.
  • Net operating cash flow has significantly increased by 299.08% to $5.85 million when compared to the same quarter last year. In addition, STONEMOR PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -344.62%.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. 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.
  • Currently the debt-to-equity ratio of 1.69 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Regardless of the company's weak debt-to-equity ratio, STON has managed to keep a strong quick ratio of 1.75, which demonstrates the ability to cover short-term cash needs.
  • 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 Diversified Consumer Services industry. The net income has significantly decreased by 2271.9% when compared to the same quarter one year ago, falling from $0.41 million to -$8.88 million.

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