What To Hold: 3 Hold-Rated Dividend Stocks AZUR, MCC, LRE

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."

Azure Midstream Partners

Dividend Yield: 8.60%

Azure Midstream Partners (NYSE: AZUR) shares currently have a dividend yield of 8.60%.

Azure Midstream Partners, LP acquires, owns, develops, and operates midstream energy assets in the United States. It operates through two segments, Gathering and Processing; and Logistics. The company has a P/E ratio of 13.95.

The average volume for Azure Midstream Partners has been 69,200 shares per day over the past 30 days. Azure Midstream Partners has a market cap of $157.8 million and is part of the energy industry. Shares are down 12% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Azure Midstream Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 38.6%. Since the same quarter one year prior, revenues slightly increased by 2.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income increased by 1.4% when compared to the same quarter one year prior, going from -$1.29 million to -$1.27 million.
  • The current debt-to-equity ratio, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.99 is somewhat weak and could be cause for future problems.
  • The gross profit margin for AZURE MIDSTREAM PARTNERS LP is currently lower than what is desirable, coming in at 28.94%. Regardless of AZUR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, AZUR's net profit margin of -9.89% significantly underperformed when compared to the industry average.
  • Net operating cash flow has significantly decreased to -$2.60 million or 129.37% 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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Medley Capital

Dividend Yield: 13.10%

Medley Capital (NYSE: MCC) shares currently have a dividend yield of 13.10%.

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 8.33.

The average volume for Medley Capital has been 349,200 shares per day over the past 30 days. Medley Capital has a market cap of $530.4 million and is part of the financial services industry. Shares are down 0.9% year-to-date as of the close of trading on Tuesday.

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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 5.7%. 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 191.13%.
  • 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 26.37%, 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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LRR Energy

Dividend Yield: 9.40%

LRR Energy (NYSE: LRE) shares currently have a dividend yield of 9.40%.

LRR Energy, L.P., through its subsidiary, LRE Operating, LLC, operates, acquires, exploits, and develops producing oil and natural gas properties in North America. The company has a P/E ratio of 7.79.

The average volume for LRR Energy has been 214,000 shares per day over the past 30 days. LRR Energy has a market cap of $223.2 million and is part of the energy industry. Shares are up 12.4% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates LRR Energy as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 38.6%. Since the same quarter one year prior, revenues rose by 39.1%. 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 declined marginally to $15.65 million or 2.96% when compared to the same quarter last year. Despite a decrease in cash flow of 2.96%, LRR ENERGY LP is still significantly exceeding the industry average of -53.28%.
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 1025.6% when compared to the same quarter one year ago, falling from $2.69 million to -$24.94 million.

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