3 Hold-Rated Dividend Stocks: IRET, FSC, CMLP

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."

Investors Real Estate

Dividend Yield: 7.10%

Investors Real Estate (NYSE: IRET) shares currently have a dividend yield of 7.10%.

Investors Real Estate Trust is a real estate investment trust. The trust invests in real estate markets of United States. It is primarily engaged in investment and operation of the the real estate assets.

The average volume for Investors Real Estate has been 455,800 shares per day over the past 30 days. Investors Real Estate has a market cap of $895.0 million and is part of the real estate industry. Shares are down 9.2% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Investors Real Estate as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and good cash flow from operations. 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:
  • 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 139.0% when compared to the same quarter one year prior, rising from $3.50 million to $8.37 million.
  • 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 6.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • INVESTORS REAL ESTATE TRUST has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. 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, INVESTORS REAL ESTATE TRUST swung to a loss, reporting -$0.28 versus $0.09 in the prior year. This year, the market expects an improvement in earnings ($0.08 versus -$0.28).
  • The gross profit margin for INVESTORS REAL ESTATE TRUST is currently lower than what is desirable, coming in at 30.93%. Regardless of IRET's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, IRET's net profit margin of 11.39% is significantly lower than the industry average.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, INVESTORS REAL ESTATE TRUST's return on equity significantly trails that of both the industry average and the S&P 500.

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Fifth Street Finance Corporation

Dividend Yield: 10.40%

Fifth Street Finance Corporation (NASDAQ: FSC) shares currently have a dividend yield of 10.40%.

Fifth Street Finance Corp. The company has a P/E ratio of 8.61.

The average volume for Fifth Street Finance Corporation has been 927,600 shares per day over the past 30 days. Fifth Street Finance Corporation has a market cap of $1.1 billion and is part of the financial services industry. Shares are down 13.7% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Fifth Street Finance Corporation as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins, good cash flow from operations and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • The gross profit margin for FIFTH STREET FINANCE CORP is rather high; currently it is at 64.98%. Regardless of FSC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FSC's net profit margin of 37.27% significantly outperformed against the industry.
  • Net operating cash flow has significantly increased by 161.67% to $173.18 million when compared to the same quarter last year. Despite an increase in cash flow, FIFTH STREET FINANCE CORP's cash flow growth rate is still lower than the industry average growth rate of 190.66%.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, FIFTH STREET FINANCE CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, FSC has underperformed the S&P 500 Index, declining 24.95% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

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Crestwood Midstream Partners

Dividend Yield: 12.10%

Crestwood Midstream Partners (NYSE: CMLP) shares currently have a dividend yield of 12.10%.

Crestwood Midstream Partners LP provides gathering, processing, storage, and transportation solutions to customers in the crude oil, natural gas liquids (NGL), and natural gas sectors of the energy industry in the United States.

The average volume for Crestwood Midstream Partners has been 701,600 shares per day over the past 30 days. Crestwood Midstream Partners has a market cap of $2.5 billion and is part of the energy industry. Shares are down 13.8% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Crestwood Midstream Partners as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures 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:
  • 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 570.8% when compared to the same quarter one year prior, rising from $2.40 million to $16.10 million.
  • The current debt-to-equity ratio, 0.53, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.17, which illustrates the ability to avoid short-term cash problems.
  • CRESTWOOD MIDSTREAM PTNRS LP 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, CRESTWOOD MIDSTREAM PTNRS LP reported poor results of -$0.46 versus -$0.40 in the prior year. This year, the market expects an improvement in earnings ($0.14 versus -$0.46).
  • CMLP'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 35.11%, 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.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, CRESTWOOD MIDSTREAM PTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.

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