What To Hold: 3 Hold-Rated Dividend Stocks GLP, ASC, FGP

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."

Global Partners

Dividend Yield: 17.60%

Global Partners (NYSE: GLP) shares currently have a dividend yield of 17.60%.

Global Partners LP, a midstream logistics and marketing company, distributes gasoline, distillates, residual oil, and renewable fuels to wholesalers, retailers, and commercial customers in the New England states and New York. The company has a P/E ratio of 7.41.

The average volume for Global Partners has been 281,100 shares per day over the past 30 days. Global Partners has a market cap of $539.2 million and is part of the wholesale industry. Shares are down 12.4% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Global Partners as a hold. Among the primary strengths of the company is its reasonable valuation levels, considering its current price compared to earnings, book value and other measures. At the same time, however, we also find weaknesses including generally higher debt management risk, weak operating cash flow and deteriorating net income.

Highlights from the ratings report include:
  • GLP, with its decline in revenue, slightly underperformed the industry average of 36.8%. Since the same quarter one year prior, revenues fell by 38.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • GLOBAL PARTNERS LP 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, GLOBAL PARTNERS LP increased its bottom line by earning $3.96 versus $1.43 in the prior year. For the next year, the market is expecting a contraction of 67.8% in earnings ($1.28 versus $3.96).
  • Currently the debt-to-equity ratio of 1.90 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, GLP has a quick ratio of 0.68, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has significantly decreased to $51.84 million or 64.09% 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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Ardmore Shipping

Dividend Yield: 13.40%

Ardmore Shipping (NYSE: ASC) shares currently have a dividend yield of 13.40%.

Ardmore Shipping Corporation engages in the seaborne transportation of petroleum products and chemicals through product and chemical tankers worldwide. As of December 31, 2014, the company operated 14 vessels, as well as had 10 vessels under construction. The company has a P/E ratio of 14.65.

The average volume for Ardmore Shipping has been 342,200 shares per day over the past 30 days. Ardmore Shipping has a market cap of $241.0 million and is part of the transportation industry. Shares are down 26.6% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Ardmore Shipping 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 expanding profit margins. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.

Highlights from the ratings report include:
  • ASC's very impressive revenue growth greatly exceeded the industry average of 36.8%. Since the same quarter one year prior, revenues leaped by 150.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • ARDMORE SHIPPING CORP has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. 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, ARDMORE SHIPPING CORP turned its bottom line around by earning $0.05 versus -$0.21 in the prior year. This year, the market expects an improvement in earnings ($1.40 versus $0.05).
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, ARDMORE SHIPPING CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • This stock's share value has moved by only 15.59% over the past year. 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.
  • The debt-to-equity ratio of 1.12 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, ASC's quick ratio is somewhat strong at 1.45, demonstrating the ability to handle short-term liquidity needs.

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Ferrellgas Partners

Dividend Yield: 13.50%

Ferrellgas Partners (NYSE: FGP) shares currently have a dividend yield of 13.50%.

Ferrellgas Partners, L.P. distributes and sells propane and related equipment and supplies primarily in the United States. The company transports propane to propane distribution locations, tanks on customers' premises, or to portable propane tanks delivered to retailers.

The average volume for Ferrellgas Partners has been 420,300 shares per day over the past 30 days. Ferrellgas Partners has a market cap of $1.5 billion and is part of the energy industry. Shares are down 13.5% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Ferrellgas Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity 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:
  • The revenue growth came in higher than the industry average of 10.6%. Since the same quarter one year prior, revenues slightly increased by 6.3%. 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.
  • Compared to other companies in the Gas Utilities industry and the overall market, FERRELLGAS PARTNERS -LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for FERRELLGAS PARTNERS -LP is currently extremely low, coming in at 13.81%. Regardless of FGP's low profit margin, it has managed to increase from the same period last year.
  • The debt-to-equity ratio is very high at 21.19 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 0.44, which clearly demonstrates the inability to cover short-term cash needs.

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