What To Hold: 3 Hold-Rated Dividend Stocks AMID, ACRE, NTL

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."

American Midstream Partners

Dividend Yield: 14.30%

American Midstream Partners (NYSE: AMID) shares currently have a dividend yield of 14.30%.

American Midstream Partners, LP engages in gathering, treating, processing, and transporting natural gas, fractionating natural gas liquids (NGLs), and storing specialty chemical products in the Gulf Coast and Southeast regions of the United States.

The average volume for American Midstream Partners has been 58,500 shares per day over the past 30 days. American Midstream Partners has a market cap of $300.2 million and is part of the energy industry. Shares are down 32.7% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates American Midstream Partners as a hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income 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:
  • AMERICAN MIDSTREAM PRTNRS LP has improved earnings per share by 47.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, AMERICAN MIDSTREAM PRTNRS LP continued to lose money by earning -$6.47 versus -$6.63 in the prior year. This year, the market expects an improvement in earnings ($0.55 versus -$6.47).
  • 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 106.5% when compared to the same quarter one year prior, rising from $0.40 million to $0.83 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.88, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.16 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • AMID'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 59.62%, 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.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, AMERICAN MIDSTREAM PRTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.

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Ares Commercial Real Estate

Dividend Yield: 8.40%

Ares Commercial Real Estate (NYSE: ACRE) shares currently have a dividend yield of 8.40%.

Ares Commercial Real Estate Corporation operates as a specialty finance company. The company operates in two segments, Principal Lending and Mortgage Banking. The company has a P/E ratio of 12.82.

The average volume for Ares Commercial Real Estate has been 141,400 shares per day over the past 30 days. Ares Commercial Real Estate has a market cap of $340.7 million and is part of the real estate industry. Shares are up 4.6% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Ares Commercial Real Estate as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share and compelling growth in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 8.9%. Since the same quarter one year prior, revenues rose by 45.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ARES COMMERCIAL REAL ESTATE has improved earnings per share by 47.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ARES COMMERCIAL REAL ESTATE increased its bottom line by earning $0.85 versus $0.73 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus $0.85).
  • The gross profit margin for ARES COMMERCIAL REAL ESTATE is rather high; currently it is at 65.96%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 24.67% trails 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ARES COMMERCIAL REAL ESTATE's return on equity is below that of both the industry average and the S&P 500.
  • ACRE has underperformed the S&P 500 Index, declining 6.31% from its price level of one year ago. 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.

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Nortel Inversora

Dividend Yield: 13.00%

Nortel Inversora (NYSE: NTL) shares currently have a dividend yield of 13.00%.

Nortel Inversora S.A., through its subsidiary, Telecom Argentina S.A., provides fixed-line public and mobile telecommunication services. It operates through three segments: Fixed Services, Personal Mobile Services, and Nucleo Mobile Services. The company has a P/E ratio of 4.93.

The average volume for Nortel Inversora has been 3,600 shares per day over the past 30 days. Nortel Inversora has a market cap of $2.3 billion and is part of the telecommunications industry. Shares are down 20.5% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Nortel Inversora as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.6%. Since the same quarter one year prior, revenues slightly increased by 7.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • NTL's debt-to-equity ratio is very low at 0.13 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.72 is somewhat weak and could be cause for future problems.
  • 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 Diversified Telecommunication Services industry and the overall market, NORTEL INVERSORA SA's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has decreased to $131.98 million or 16.27% 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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