What To Hold: 3 Hold-Rated Dividend Stocks CMLP, TS, MEMP

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."

Crestwood Midstream Partners

Dividend Yield: 13.70%

Crestwood Midstream Partners (NYSE: CMLP) shares currently have a dividend yield of 13.70%.

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 798,800 shares per day over the past 30 days. Crestwood Midstream Partners has a market cap of $2.3 billion and is part of the energy industry. Shares are down 21.3% year-to-date as of the close of trading on Friday.

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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 ($0.05 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 45.43%, 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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Tenaris

Dividend Yield: 4.30%

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

Tenaris S.A., through its subsidiaries, manufactures and supplies steel pipe products and related services for the energy and other industrial applications. The company has a P/E ratio of 12.17.

The average volume for Tenaris has been 1,671,100 shares per day over the past 30 days. Tenaris has a market cap of $16.4 billion and is part of the metals & mining industry. Shares are down 7.3% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Tenaris 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, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • TS's debt-to-equity ratio is very low at 0.09 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, TS has a quick ratio of 1.84, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has increased to $877.89 million or 43.48% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 12.07%.
  • 40.26% is the gross profit margin for TENARIS SA which we consider to be strong. Regardless of TS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TS's net profit margin of 9.86% compares favorably to the industry average.
  • TENARIS SA's earnings per share declined by 47.2% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, TENARIS SA reported lower earnings of $1.97 versus $2.63 in the prior year. For the next year, the market is expecting a contraction of 33.0% in earnings ($1.32 versus $1.97).
  • 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. In comparison to the other companies in the Energy Equipment & Services industry and the overall market, TENARIS SA'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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Memorial Production Partners

Dividend Yield: 14.10%

Memorial Production Partners (NASDAQ: MEMP) shares currently have a dividend yield of 14.10%.

Memorial Production Partners LP, through its subsidiary, engages in the acquisition, development, exploitation, and production of oil and natural gas properties. The company has a P/E ratio of 48.91.

The average volume for Memorial Production Partners has been 729,500 shares per day over the past 30 days. Memorial Production Partners has a market cap of $1.3 billion and is part of the energy industry. Shares are up 7.3% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Memorial Production Partners as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has increased to $71.96 million or 49.85% when compared to the same quarter last year. In addition, MEMORIAL PRODUCTION PRTRS LP has also vastly surpassed the industry average cash flow growth rate of -53.17%.
  • Despite the weak revenue results, MEMP has outperformed against the industry average of 38.7%. Since the same quarter one year prior, revenues fell by 20.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 394.2% when compared to the same quarter one year ago, falling from -$32.95 million to -$162.82 million.
  • Currently the debt-to-equity ratio of 1.74 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.46, which clearly demonstrates the inability to cover short-term cash needs.

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