3 Hold-Rated Dividend Stocks: MITT, EFC, HCAP

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."

AG Mortgage Investment

Dividend Yield: 12.70%

AG Mortgage Investment (NYSE: MITT) shares currently have a dividend yield of 12.70%.

AG Mortgage Investment Trust, Inc., a real estate investment trust, focuses on investing, acquiring, and managing a portfolio of mortgage assets, other real estate-related securities, and financial assets. It invests in residential mortgage-backed securities (RMBS), for which a U.S. The company has a P/E ratio of 6.96.

The average volume for AG Mortgage Investment has been 198,500 shares per day over the past 30 days. AG Mortgage Investment has a market cap of $537.1 million and is part of the real estate industry. Shares are up 1.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates AG Mortgage Investment as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The gross profit margin for AG MORTGAGE INVESTMENT TRUST is currently very high, coming in at 77.50%. Regardless of MITT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MITT's net profit margin of 46.22% significantly outperformed against the industry.
  • The revenue fell significantly faster than the industry average of 8.5%. Since the same quarter one year prior, revenues fell by 29.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Net operating cash flow has declined marginally to $23.29 million or 1.90% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, AG MORTGAGE INVESTMENT TRUST has marginally lower results.
  • 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 59.1% when compared to the same quarter one year ago, falling from $31.19 million to $12.76 million.

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Ellington Financial

Dividend Yield: 13.10%

Ellington Financial (NYSE: EFC) shares currently have a dividend yield of 13.10%.

Ellington Financial LLC, a specialty finance company, acquires and manages mortgage-related assets, including residential mortgage backed securities backed by prime jumbo, Alt-A, manufactured housing and subprime residential mortgage loans, and residential mortgage-backed securities. The company has a P/E ratio of 11.14.

The average volume for Ellington Financial has been 113,900 shares per day over the past 30 days. Ellington Financial has a market cap of $663.3 million and is part of the real estate industry. Shares are down 1.3% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Ellington Financial as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. However, as a counter to these strengths, 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:
  • The revenue growth came in higher than the industry average of 5.8%. Since the same quarter one year prior, revenues rose by 24.7%. 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.
  • The gross profit margin for ELLINGTON FINANCIAL LLC is currently very high, coming in at 76.30%. Regardless of EFC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EFC's net profit margin of 71.85% significantly outperformed against the industry.
  • ELLINGTON FINANCIAL LLC's earnings per share declined by 35.2% 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 two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ELLINGTON FINANCIAL LLC reported lower earnings of $2.23 versus $3.46 in the prior year. This year, the market expects an improvement in earnings ($2.37 versus $2.23).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Capital Markets industry average, but is greater than that of the S&P 500. The net income has decreased by 14.9% when compared to the same quarter one year ago, dropping from $22.64 million to $19.26 million.
  • 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 Capital Markets industry and the overall market, ELLINGTON FINANCIAL LLC's return on equity is below that of both the industry average and the S&P 500.

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Harvest Capital Credit

Dividend Yield: 9.60%

Harvest Capital Credit (NASDAQ: HCAP) shares currently have a dividend yield of 9.60%.

Harvest Capital Credit LLC is a business development company providing structured credit to small businesses. The company has a P/E ratio of 11.57.

The average volume for Harvest Capital Credit has been 26,000 shares per day over the past 30 days. Harvest Capital Credit has a market cap of $87.5 million and is part of the financial services industry. Shares are up 22.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Harvest Capital Credit as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and expanding profit margins. 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 greatly exceeded the industry average of 5.8%. Since the same quarter one year prior, revenues rose by 48.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 426.5% when compared to the same quarter one year prior, rising from $0.52 million to $2.74 million.
  • Net operating cash flow has slightly increased to -$15.77 million or 8.21% when compared to the same quarter last year. Despite an increase in cash flow of 8.21%, HARVEST CAPITAL CREDIT CORP is still growing at a significantly lower rate than the industry average of 190.26%.
  • HARVEST CAPITAL CREDIT CORP reported significant earnings per share improvement 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, HARVEST CAPITAL CREDIT CORP increased its bottom line by earning $1.52 versus $0.47 in the prior year. For the next year, the market is expecting a contraction of 13.2% in earnings ($1.32 versus $1.52).
  • In its most recent trading session, HCAP 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

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