3 Hold-Rated Dividend Stocks: TAXI, ALDW, MCC

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."

Medallion Financial

Dividend Yield: 10.10%

Medallion Financial (NASDAQ: TAXI) shares currently have a dividend yield of 10.10%.

Medallion Financial Corp., through its subsidiaries, operates as a specialty finance company in the United States. The company engages in originating, acquiring, and servicing loans that finance taxicab medallions and various types of commercial businesses. The company has a P/E ratio of 8.91.

The average volume for Medallion Financial has been 234,300 shares per day over the past 30 days. Medallion Financial has a market cap of $244.7 million and is part of the financial services industry. Shares are down 1.8% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Medallion Financial as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and growth in earnings per share. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 5.6%. Since the same quarter one year prior, revenues rose by 28.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for MEDALLION FINANCIAL CORP is rather high; currently it is at 59.86%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 59.45% significantly outperformed against the industry average.
  • MEDALLION FINANCIAL CORP has improved earnings per share by 7.4% 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, MEDALLION FINANCIAL CORP reported lower earnings of $1.14 versus $1.16 in the prior year. This year, the market expects an improvement in earnings ($1.28 versus $1.14).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Capital Markets industry and the overall market, MEDALLION FINANCIAL CORP's return on equity is below that of both the industry average and the S&P 500.
  • TAXI has underperformed the S&P 500 Index, declining 19.55% 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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Alon USA Partners

Dividend Yield: 13.20%

Alon USA Partners (NYSE: ALDW) shares currently have a dividend yield of 13.20%.

Alon USA Partners, LP refines and markets petroleum products primarily in the South Central and Southwestern regions of the United States. The company owns and operates a crude oil refinery in Big Spring, Texas with crude oil throughput capacity of 73,000 barrels per day. The company has a P/E ratio of 8.22.

The average volume for Alon USA Partners has been 234,000 shares per day over the past 30 days. Alon USA Partners has a market cap of $1.3 billion and is part of the energy industry. Shares are up 63.3% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Alon USA Partners as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, attractive valuation levels and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and poor profit margins.

Highlights from the ratings report include:
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ALON USA PARTNERS LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 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.
  • Net operating cash flow has decreased to $27.09 million or 40.16% when compared to the same quarter last year. Despite a decrease in cash flow ALON USA PARTNERS LP is still fairing well by exceeding its industry average cash flow growth rate of -53.34%.
  • Currently the debt-to-equity ratio of 1.61 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated.

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Medley Capital

Dividend Yield: 12.90%

Medley Capital (NYSE: MCC) shares currently have a dividend yield of 12.90%.

Medley Capital Corporation is a business development company. The fund seeks to invest in privately negotiated debt and equity securities of small and middle market companies. The company has a P/E ratio of 8.47.

The average volume for Medley Capital has been 379,000 shares per day over the past 30 days. Medley Capital has a market cap of $539.7 million and is part of the financial services industry. Shares are up 1.3% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Medley Capital as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations 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 disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 5.6%. Since the same quarter one year prior, revenues rose by 17.1%. 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 119.53% to $25.12 million when compared to the same quarter last year. Despite an increase in cash flow of 119.53%, MEDLEY CAPITAL CORP is still growing at a significantly lower rate than the industry average of 190.66%.
  • The gross profit margin for MEDLEY CAPITAL CORP is rather high; currently it is at 65.26%. Regardless of MCC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MCC's net profit margin of 32.04% 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. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, MEDLEY CAPITAL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 26.56%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 28.57% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

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