What To Hold: 3 Hold-Rated Dividend Stocks GPT, NTI, PCH

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."

Gramercy Property

Dividend Yield: 16.90%

Gramercy Property (NYSE: GPT) shares currently have a dividend yield of 16.90%.

Gramercy Property Trust, Inc. is an equity real estate investment trust. The firm invests in the real estate markets of the United States. It makes investments in industrial and office properties to create its portfolio. The firm was formerly known as Gramercy Capital Corp.

The average volume for Gramercy Property has been 2,700,800 shares per day over the past 30 days. Gramercy Property has a market cap of $3.3 billion and is part of the real estate industry. Shares are up 3.1% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Gramercy Property as a hold. Among the primary strengths of the company is its robust revenue growth -- not just in the most recent periods but in previous quarters as well. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • GPT's very impressive revenue growth greatly exceeded the industry average of 7.9%. Since the same quarter one year prior, revenues leaped by 86.1%. 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.
  • GRAMERCY PROPERTY TRUST 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. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GRAMERCY PROPERTY TRUST swung to a loss, reporting -$0.25 versus $0.64 in the prior year. This year, the market expects an improvement in earnings ($0.04 versus -$0.25).
  • The share price of GRAMERCY PROPERTY TRUST has not done very well: it is down 11.72% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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 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 788.1% when compared to the same quarter one year ago, falling from -$5.59 million to -$49.66 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, GRAMERCY PROPERTY TRUST's return on equity significantly trails that of both the industry average and the S&P 500.

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Northern Tier Energy

Dividend Yield: 6.50%

Northern Tier Energy (NYSE: NTI) shares currently have a dividend yield of 6.50%.

Northern Tier Energy LP, an independent downstream energy company, engages in refining, retail, and pipeline operations in the United States. It operates through two segments, Refining and Retail. The Refining segment operates a 97,800 barrels per stream day refinery in St. The company has a P/E ratio of 6.53.

The average volume for Northern Tier Energy has been 944,000 shares per day over the past 30 days. Northern Tier Energy has a market cap of $2.2 billion and is part of the energy industry. Shares are down 9% year-to-date as of the close of trading on Wednesday.

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

Highlights from the ratings report include:
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NORTHERN TIER ENERGY LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Despite the weak revenue results, NTI has outperformed against the industry average of 34.6%. Since the same quarter one year prior, revenues fell by 20.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for NORTHERN TIER ENERGY LP is currently extremely low, coming in at 3.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.65% trails that of the industry average.
  • 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 178.8% when compared to the same quarter one year ago, falling from $16.00 million to -$12.60 million.

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Potlatch

Dividend Yield: 5.20%

Potlatch (NASDAQ: PCH) shares currently have a dividend yield of 5.20%.

Potlatch Corporation operates as a real estate investment trust (REIT) that owns and manages timberlands located in Arkansas, Idaho, Minnesota and Wisconsin in the United States. The company has a P/E ratio of 37.74.

The average volume for Potlatch has been 357,700 shares per day over the past 30 days. Potlatch has a market cap of $1.2 billion and is part of the real estate industry. Shares are down 4% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Potlatch as a hold. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. At the same time, however, we also find weaknesses including deteriorating net income, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • PCH, with its decline in revenue, underperformed when compared the industry average of 7.9%. Since the same quarter one year prior, revenues slightly dropped by 5.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, POTLATCH CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • POTLATCH CORP 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, POTLATCH CORP reported lower earnings of $0.78 versus $2.20 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus $0.78).
  • The gross profit margin for POTLATCH CORP is rather low; currently it is at 22.60%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.57% significantly trails the industry average.
  • Net operating cash flow has decreased to $18.87 million or 20.42% 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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