3 Hold-Rated Dividend Stocks: TCAP, HNP, AINV

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."

Triangle Capital

Dividend Yield: 9.90%

Triangle Capital (NYSE: TCAP) shares currently have a dividend yield of 9.90%.

Triangle Capital Corporation is a business development company specializing in private equity and mezzanine investments. The company has a P/E ratio of 9.04.

The average volume for Triangle Capital has been 187,600 shares per day over the past 30 days. Triangle Capital has a market cap of $610.4 million and is part of the financial services industry. Shares are down 5.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Triangle Capital as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth 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 came in higher than the industry average of 24.3%. Since the same quarter one year prior, revenues slightly increased by 3.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • TRIANGLE CAPITAL CORP 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, TRIANGLE CAPITAL CORP increased its bottom line by earning $1.44 versus $1.04 in the prior year. This year, the market expects an improvement in earnings ($1.75 versus $1.44).
  • 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 Capital Markets industry and the overall market, TRIANGLE CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
  • TCAP has underperformed the S&P 500 Index, declining 24.14% 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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Huaneng Power International

Dividend Yield: 10.80%

Huaneng Power International (NYSE: HNP) shares currently have a dividend yield of 10.80%.

Huaneng Power International, Inc., an independent power producer, generates and sells electricity and heat to the regional or provincial grid companies in the People's Republic of China and Singapore. The company has a P/E ratio of 66.38.

The average volume for Huaneng Power International has been 73,500 shares per day over the past 30 days. Huaneng Power International has a market cap of $10.1 billion and is part of the utilities industry. Shares are down 21.7% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Huaneng Power International as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • HNP, with its decline in revenue, underperformed when compared the industry average of 3.1%. Since the same quarter one year prior, revenues fell by 19.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Looking at the price performance of HNP's shares over the past 12 months, there is not much good news to report: the stock is down 53.12%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.
  • Despite the current debt-to-equity ratio of 1.75, it is still below the industry average, suggesting that this level of debt is acceptable within the Independent Power Producers & Energy Traders industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.22 is very low and demonstrates very weak liquidity.

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Apollo Investment

Dividend Yield: 15.50%

Apollo Investment (NASDAQ: AINV) shares currently have a dividend yield of 15.50%.

Apollo Investment Corporation is business development company and operates as a closed-end management investment company. The company invests in middle market companies. It provides direct equity capital, mezzanine and senior secured loans, and subordinated debt and loans.

The average volume for Apollo Investment has been 1,032,200 shares per day over the past 30 days. Apollo Investment has a market cap of $1.2 billion and is part of the financial services industry. Shares are down 1.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Apollo Investment as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, deteriorating net income and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has increased to $55.91 million or 14.32% when compared to the same quarter last year. In addition, APOLLO INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of -183.28%.
  • The gross profit margin for APOLLO INVESTMENT CORP is currently very high, coming in at 71.48%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -27.32% is in-line with the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 24.3%. Since the same quarter one year prior, revenues fell by 14.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Looking at the price performance of AINV's shares over the past 12 months, there is not much good news to report: the stock is down 30.70%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.
  • 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 Capital Markets industry and the overall market, APOLLO INVESTMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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