3 Hold-Rated Dividend Stocks: SEAS, DDR, DHT

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."

SeaWorld Entertainment

Dividend Yield: 4.10%

SeaWorld Entertainment (NYSE: SEAS) shares currently have a dividend yield of 4.10%.

SeaWorld Entertainment, Inc. operates as a theme park and entertainment company in the United States. The company has a P/E ratio of 33.05.

The average volume for SeaWorld Entertainment has been 1,136,700 shares per day over the past 30 days. SeaWorld Entertainment has a market cap of $1.9 billion and is part of the leisure industry. Shares are up 13.3% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates SeaWorld Entertainment as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • SEAS's revenue growth has slightly outpaced the industry average of 7.4%. Since the same quarter one year prior, revenues slightly increased by 1.1%. 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 significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 11.4% when compared to the same quarter one year prior, going from -$49.22 million to -$43.60 million.
  • SEAWORLD ENTERTAINMENT INC has improved earnings per share by 8.9% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, SEAWORLD ENTERTAINMENT INC reported lower earnings of $0.58 versus $0.59 in the prior year. This year, the market expects an improvement in earnings ($0.88 versus $0.58).
  • The gross profit margin for SEAWORLD ENTERTAINMENT INC is rather low; currently it is at 20.91%. Regardless of SEAS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SEAS's net profit margin of -20.31% significantly underperformed when compared to the industry average.
  • The debt-to-equity ratio is very high at 3.26 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.25, which clearly demonstrates the inability to cover short-term cash needs.

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DDR

Dividend Yield: 4.30%

DDR (NYSE: DDR) shares currently have a dividend yield of 4.30%.

DDR Corp. is an equity real estate investment trust. It invests in the real estate markets of the United States and Puerto Rico. The firm is in the business of acquiring, owning, developing, redeveloping, expanding, leasing and managing shopping centers.

The average volume for DDR has been 3,725,900 shares per day over the past 30 days. DDR has a market cap of $5.8 billion and is part of the real estate industry. Shares are down 12.5% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates DDR as a hold. Among the primary strengths of the company is its revenue growth. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.5%. Since the same quarter one year prior, revenues slightly increased by 6.4%. 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.
  • DDR CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, DDR CORP turned its bottom line around by earning $0.02 versus -$0.05 in the prior year. For the next year, the market is expecting a contraction of 3275.0% in earnings (-$0.64 versus $0.02).
  • In its most recent trading session, DDR 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. 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.
  • 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, DDR CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $62.70 million or 31.76% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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DHT Holdings

Dividend Yield: 7.40%

DHT Holdings (NYSE: DHT) shares currently have a dividend yield of 7.40%.

DHT Holdings, Inc. operates crude oil tankers in Bermuda. As of March 10, 2015, its fleet consisted of 18 crude oil tankers, including 14 very large crude carriers, 2 Suezmax tankers, and 2 Aframax tankers. The company was incorporated in 2005 and is headquartered in Hamilton, Bermuda. The company has a P/E ratio of 15.26.

The average volume for DHT Holdings has been 1,314,300 shares per day over the past 30 days. DHT Holdings has a market cap of $751.2 million and is part of the transportation industry. Shares are up 10.7% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates DHT Holdings as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • DHT's very impressive revenue growth greatly exceeded the industry average of 38.6%. Since the same quarter one year prior, revenues leaped by 290.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.94, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 3.47, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has significantly increased by 323.83% to $42.77 million when compared to the same quarter last year. In addition, DHT HOLDINGS INC has also vastly surpassed the industry average cash flow growth rate of -53.28%.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, DHT HOLDINGS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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