3 Hold-Rated Dividend Stocks: SRC, OKS, CPSI

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."

Spirit Realty Capital

Dividend Yield: 6.50%

Spirit Realty Capital (NYSE: SRC) shares currently have a dividend yield of 6.50%.

Spirit Realty Capital, Inc is a publicly traded real estate investment trust. The company has a P/E ratio of 42.62.

The average volume for Spirit Realty Capital has been 5,484,100 shares per day over the past 30 days. Spirit Realty Capital has a market cap of $4.7 billion and is part of the real estate industry. Shares are up 10.1% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Spirit Realty Capital as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • SRC's revenue growth has slightly outpaced the industry average of 7.9%. Since the same quarter one year prior, revenues slightly increased by 9.0%. 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.
  • SPIRIT REALTY CAPITAL INC 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SPIRIT REALTY CAPITAL INC turned its bottom line around by earning $0.27 versus -$0.10 in the prior year. This year, the market expects an improvement in earnings ($0.29 versus $0.27).
  • 48.97% is the gross profit margin for SPIRIT REALTY CAPITAL INC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, SRC's net profit margin of 6.72% is significantly lower than the industry average.
  • The share price of SPIRIT REALTY CAPITAL INC has not done very well: it is down 9.99% 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 66.7% when compared to the same quarter one year ago, falling from $34.11 million to $11.35 million.

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ONEOK Partners

Dividend Yield: 9.90%

ONEOK Partners (NYSE: OKS) shares currently have a dividend yield of 9.90%.

ONEOK Partners, L.P. engages in the gathering, processing, storage, and transportation of natural gas in the United States. It operates through three segments: Natural Gas Gathering and Processing, Natural Gas Liquids, and Natural Gas Pipelines. The company has a P/E ratio of 45.07.

The average volume for ONEOK Partners has been 1,801,200 shares per day over the past 30 days. ONEOK Partners has a market cap of $9.1 billion and is part of the energy industry. Shares are up 9.6% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates ONEOK 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 deteriorating net income, generally higher debt management risk and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 34.6%. Since the same quarter one year prior, revenues fell by 32.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • ONEOK 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. 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, ONEOK PARTNERS -LP reported lower earnings of $0.77 versus $2.34 in the prior year. This year, the market expects an improvement in earnings ($2.05 versus $0.77).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 97.3% when compared to the same quarter one year ago, falling from $263.23 million to $7.22 million.
  • The debt-to-equity ratio of 1.16 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 0.38, which clearly demonstrates the inability to cover short-term cash needs.

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Computer Programs and Systems

Dividend Yield: 4.90%

Computer Programs and Systems (NASDAQ: CPSI) shares currently have a dividend yield of 4.90%.

Computer Programs and Systems, Inc. provides healthcare information technology solutions for rural and community hospitals in the United States. The company's integrated enterprise-wide system automates clinical and financial data management in the functional areas of a hospital. The company has a P/E ratio of 31.66.

The average volume for Computer Programs and Systems has been 183,800 shares per day over the past 30 days. Computer Programs and Systems has a market cap of $694.6 million and is part of the computer software & services industry. Shares are up 4% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Computer Programs and Systems 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, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • CPSI has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.96, which clearly demonstrates the ability to cover short-term cash needs.
  • After a year of stock price fluctuations, the net result is that CPSI's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. 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.
  • 39.60% is the gross profit margin for COMPUTER PROGRAMS & SYSTEMS which we consider to be strong. Regardless of CPSI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.67% trails 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 Health Care Technology industry. The net income has significantly decreased by 49.7% when compared to the same quarter one year ago, falling from $6.74 million to $3.39 million.
  • Net operating cash flow has significantly decreased to $4.55 million or 64.66% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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