3 Hold-Rated Dividend Stocks: RPAI, CMLP, SUI

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."

Retail Properties of America

Dividend Yield: 4.50%

Retail Properties of America (NYSE: RPAI) shares currently have a dividend yield of 4.50%.

Retail Properties of America, Inc. is a real estate investment trust. It engages in acquisition, development and management of properties. The trust invests in the real estate markets of United States. The company has a P/E ratio of 104.86.

The average volume for Retail Properties of America has been 1,262,900 shares per day over the past 30 days. Retail Properties of America has a market cap of $3.5 billion and is part of the real estate industry. Shares are down 11.1% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Retail Properties of America as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and poor profit margins.

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 3.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • Net operating cash flow has increased to $71.13 million or 22.31% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 0.79%.
  • RETAIL PPTYS OF AMERICA INC reported flat earnings per share in the most recent quarter. 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, RETAIL PPTYS OF AMERICA INC turned its bottom line around by earning $0.15 versus -$0.20 in the prior year. For the next year, the market is expecting a contraction of 26.7% in earnings ($0.11 versus $0.15).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income has decreased by 7.4% when compared to the same quarter one year ago, dropping from $14.13 million to $13.08 million.
  • In its most recent trading session, RPAI 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. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

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Crestwood Midstream Partners

Dividend Yield: 13.00%

Crestwood Midstream Partners (NYSE: CMLP) shares currently have a dividend yield of 13.00%.

Crestwood Midstream Partners LP provides gathering, processing, storage, and transportation solutions to customers in the crude oil, natural gas liquids (NGL), and natural gas sectors of the energy industry in the United States.

The average volume for Crestwood Midstream Partners has been 757,400 shares per day over the past 30 days. Crestwood Midstream Partners has a market cap of $2.4 billion and is part of the energy industry. Shares are down 16.6% year-to-date as of the close of trading on Wednesday.

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

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 Oil, Gas & Consumable Fuels industry. The net income increased by 570.8% when compared to the same quarter one year prior, rising from $2.40 million to $16.10 million.
  • The current debt-to-equity ratio, 0.53, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.17, which illustrates the ability to avoid short-term cash problems.
  • CRESTWOOD MIDSTREAM PTNRS LP reported significant earnings per share improvement 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, CRESTWOOD MIDSTREAM PTNRS LP reported poor results of -$0.46 versus -$0.40 in the prior year. This year, the market expects an improvement in earnings ($0.08 versus -$0.46).
  • CMLP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 42.25%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, CRESTWOOD MIDSTREAM PTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.

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Sun Communities

Dividend Yield: 4.10%

Sun Communities (NYSE: SUI) shares currently have a dividend yield of 4.10%.

Sun Communities, Inc. operates as a real estate investment trust (REIT). It owns, operates, and develops manufactured housing communities in the midwestern, southern, and southeastern United States. The company has a P/E ratio of 137.24.

The average volume for Sun Communities has been 208,600 shares per day over the past 30 days. Sun Communities has a market cap of $3.4 billion and is part of the real estate industry. Shares are up 4.4% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Sun Communities 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 solid stock price performance. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 8.5%. Since the same quarter one year prior, revenues rose by 36.8%. 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 net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 17.0% when compared to the same quarter one year prior, going from $9.36 million to $10.96 million.
  • Compared to its closing price of one year ago, SUI's share price has jumped by 26.79%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • The gross profit margin for SUN COMMUNITIES INC is rather low; currently it is at 19.50%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 7.17% significantly trails the industry average.
  • Net operating cash flow has declined marginally to $40.94 million or 8.34% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, SUN COMMUNITIES INC has marginally lower results.

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