What To Hold: 3 Hold-Rated Dividend Stocks APTS, TGP, RSO

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."

Preferred Apartment Communities

Dividend Yield: 7.10%

Preferred Apartment Communities (AMEX: APTS) shares currently have a dividend yield of 7.10%.

Preferred Apartment Communities, Inc. is a real estate investment trust launched and managed by Preferred Apartment Advisors, LLC. The fund invests in real estate markets of the United States. It primarily acquires and operates multifamily apartment properties.

The average volume for Preferred Apartment Communities has been 171,100 shares per day over the past 30 days. Preferred Apartment Communities has a market cap of $225.6 million and is part of the real estate industry. Shares are up 11.5% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Preferred Apartment Communities 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 solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, poor profit margins and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • APTS's very impressive revenue growth greatly exceeded the industry average of 8.5%. Since the same quarter one year prior, revenues leaped by 89.9%. 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 51.41% to $7.74 million when compared to the same quarter last year. In addition, PREFERRED APARTMENT CMNTYS has also vastly surpassed the industry average cash flow growth rate of 0.81%.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 127.4% when compared to the same quarter one year ago, falling from $2.76 million to -$0.76 million.
  • The gross profit margin for PREFERRED APARTMENT CMNTYS is currently lower than what is desirable, coming in at 29.13%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -3.53% is significantly below that of the industry average.

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Teekay LNG Partners

Dividend Yield: 8.40%

Teekay LNG Partners (NYSE: TGP) shares currently have a dividend yield of 8.40%.

Teekay LNG Partners L.P. provides marine transportation services for liquefied natural gas (LNG), liquefied petroleum gas (LPG), and crude oil worldwide. The company has a P/E ratio of 13.45.

The average volume for Teekay LNG Partners has been 190,500 shares per day over the past 30 days. Teekay LNG Partners has a market cap of $2.6 billion and is part of the transportation industry. Shares are down 24.4% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Teekay LNG Partners as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

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 67.3% when compared to the same quarter one year prior, rising from $38.25 million to $63.97 million.
  • The gross profit margin for TEEKAY LNG PARTNERS LP is currently very high, coming in at 77.44%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 65.72% significantly outperformed against the industry average.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, TEEKAY LNG PARTNERS LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • TGP'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 27.14%, 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 debt-to-equity ratio of 1.24 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.45, which clearly demonstrates the inability to cover short-term cash needs.

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Resource Capital

Dividend Yield: 15.70%

Resource Capital (NYSE: RSO) shares currently have a dividend yield of 15.70%.

Resource Capital Corp., a diversified real estate investment trust, primarily focuses on originating, holding, and managing commercial mortgage loans and other commercial real estate-related debt and equity investments in the United States. The company has a P/E ratio of 14.03.

The average volume for Resource Capital has been 748,000 shares per day over the past 30 days. Resource Capital has a market cap of $546.1 million and is part of the real estate industry. Shares are down 23.4% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Resource Capital as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 8.5%. Since the same quarter one year prior, revenues rose by 42.8%. 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 gross profit margin for RESOURCE CAPITAL CORP is rather high; currently it is at 62.86%. Regardless of RSO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RSO's net profit margin of 27.32% compares favorably to the industry average.
  • 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 11.5% when compared to the same quarter one year ago, dropping from $17.52 million to $15.49 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, RESOURCE CAPITAL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.

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