3 Hold-Rated Dividend Stocks: EVOL, MN, WSR

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." Evolving Systems Dividend Yield: 7.70% Evolving Systems (NASDAQ: EVOL) shares currently have a dividend yield of 7.70%. Evolving Systems, Inc. provides software solutions and services to the wireless, wireline, and cable markets in the United Kingdom, Nigeria, Mexico, and internationally. The company has a P/E ratio of 20.39. The average volume for Evolving Systems has been 23,400 shares per day over the past 30 days. Evolving Systems has a market cap of $67.4 million and is part of the computer software & services industry. Shares are up 2.4% year-to-date as of the close of trading on Tuesday. EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE. TheStreet Ratings rates Evolving Systems as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:

  • The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.89 is somewhat weak and could be cause for future problems.
  • The gross profit margin for EVOLVING SYSTEMS INC is currently very high, coming in at 73.49%. Regardless of EVOL'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 15.35% trails the industry average.
  • Net operating cash flow has significantly decreased to -$0.67 million or 368.05% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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. When compared to other companies in the Software industry and the overall market, EVOLVING SYSTEMS INC's return on equity is below that of both the industry average and the S&P 500.
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Manning & Napier Dividend Yield: 7.50% Manning & Napier (NYSE: MN) shares currently have a dividend yield of 7.50%. Manning & Napier, Inc is publicly owned investment manager. It provides its services to net worth individuals and institutions, including 401(k) plans, pension plans, taft-hartley plans, endowments and foundations. The firm manages separate client-focused equity and fixed income portfolios. The company has a P/E ratio of 10.31. The average volume for Manning & Napier has been 74,200 shares per day over the past 30 days. Manning & Napier has a market cap of $126.1 million and is part of the financial services industry. Shares are up 2.4% year-to-date as of the close of trading on Tuesday. EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE. TheStreet Ratings rates Manning & Napier as a hold. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share. Highlights from the ratings report include:

  • MN, with its decline in revenue, slightly underperformed the industry average of 23.1%. Since the same quarter one year prior, revenues fell by 28.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • 35.30% is the gross profit margin for MANNING & NAPIER INC which we consider to be strong. Regardless of MN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MN's net profit margin of 3.74% is significantly lower than the industry average.
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Capital Markets industry average, but is less than that of the S&P 500. The net income has significantly decreased by 26.9% when compared to the same quarter one year ago, falling from $3.31 million to $2.42 million.
  • MANNING & NAPIER INC's earnings per share declined by 33.3% in the most recent quarter compared to 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, MANNING & NAPIER INC increased its bottom line by earning $0.87 versus $0.67 in the prior year. For the next year, the market is expecting a contraction of 15.5% in earnings ($0.74 versus $0.87).
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 29.51%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 33.33% compared to the year-earlier 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.
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Whitestone REIT Dividend Yield: 8.40% Whitestone REIT (NYSE: WSR) shares currently have a dividend yield of 8.40%. WhiteStone REIT is a Maryland REIT engaged in owning and operating commercial properties in culturally diverse markets in major metropolitan areas. The company has a P/E ratio of 37.67. The average volume for Whitestone REIT has been 140,800 shares per day over the past 30 days. Whitestone REIT has a market cap of $366.2 million and is part of the real estate industry. Shares are up 12.7% year-to-date as of the close of trading on Tuesday. EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE. TheStreet Ratings rates Whitestone REIT as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow. Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 5.0%. Since the same quarter one year prior, revenues rose by 20.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • WHITESTONE REIT reported significant earnings per share improvement 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, WHITESTONE REIT increased its bottom line by earning $0.24 versus $0.22 in the prior year. This year, the market expects an improvement in earnings ($0.27 versus $0.24).
  • 46.97% is the gross profit margin for WHITESTONE REIT which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, WSR's net profit margin of 19.57% significantly trails the industry average.
  • Net operating cash flow has decreased to $5.68 million or 24.43% when compared to the same quarter last year. Despite a decrease in cash flow WHITESTONE REIT is still fairing well by exceeding its industry average cash flow growth rate of -64.29%.
  • WSR has underperformed the S&P 500 Index, declining 13.92% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
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