What To Hold: 3 Hold-Rated Dividend Stocks GZT, FSC, ELRC

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."

Gazit-Globe

Dividend Yield: 14.70%

Gazit-Globe (NYSE: GZT) shares currently have a dividend yield of 14.70%.

Gazit-Globe Ltd., through its subsidiaries, acquires, owns, develops, operates, and redevelops supermarket-anchored shopping centers and retail properties in North America, Europe, Israel, and Brazil.

The average volume for Gazit-Globe has been 4,300 shares per day over the past 30 days. Gazit-Globe has a market cap of $2.2 billion and is part of the real estate industry. Shares are up 5.5% year-to-date as of the close of trading on Tuesday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreet Ratings rates Gazit-Globe as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and disappointing return on equity.

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 Management & Development industry. The net income increased by 111.1% when compared to the same quarter one year prior, rising from $44.95 million to $94.90 million.
  • GZT's revenue growth trails the industry average of 19.3%. Since the same quarter one year prior, revenues slightly increased by 6.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • GAZIT GLOBE reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, GAZIT GLOBE reported lower earnings of $0.10 versus $1.51 in the prior year.
  • The debt-to-equity ratio is very high at 5.32 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, GZT maintains a poor quick ratio of 0.73, which illustrates the inability to avoid short-term cash problems.
  • 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 Management & Development industry and the overall market on the basis of return on equity, GAZIT GLOBE underperformed against that of the industry average and is significantly less than that of the S&P 500.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

Fifth Street Finance Corporation

Dividend Yield: 10.50%

Fifth Street Finance Corporation (NASDAQ: FSC) shares currently have a dividend yield of 10.50%.

Fifth Street Finance Corp. The company has a P/E ratio of 8.60.

The average volume for Fifth Street Finance Corporation has been 863,100 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 14.1% year-to-date as of the close of trading on Tuesday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

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 189.33%.
  • 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.
  • Looking at the price performance of FSC's shares over the past 12 months, there is not much good news to report: the stock is down 25.33%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

Electro Rent

Dividend Yield: 7.60%

Electro Rent (NASDAQ: ELRC) shares currently have a dividend yield of 7.60%.

Electro Rent Corporation rents, leases, and sells new and used electronic test and measurement equipment primarily for use in the aerospace, defense, telecommunications, electronics, industrial, and semiconductor industries in the United States and internationally. The company has a P/E ratio of 15.43.

The average volume for Electro Rent has been 73,200 shares per day over the past 30 days. Electro Rent has a market cap of $252.9 million and is part of the diversified services industry. Shares are down 25.2% year-to-date as of the close of trading on Tuesday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreet Ratings rates Electro Rent as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and good cash flow from operations. 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:
  • ELRC 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.
  • The gross profit margin for ELECTRO RENT CORP is rather high; currently it is at 57.15%. Regardless of ELRC'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 4.30% trails the industry average.
  • 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 Electronic Equipment, Instruments & Components industry. The net income has significantly decreased by 46.5% when compared to the same quarter one year ago, falling from $4.54 million to $2.43 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 Electronic Equipment, Instruments & Components industry and the overall market, ELECTRO RENT CORP's return on equity is below that of both the industry average and the S&P 500.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

Other helpful dividend tools from TheStreet: