What To Hold: 3 Hold-Rated Dividend Stocks AI, DKL, NYMT

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."

Arlington Asset Investment

Dividend Yield: 18.30%

Arlington Asset Investment (NYSE: AI) shares currently have a dividend yield of 18.30%.

Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The company has a P/E ratio of 3.92.

The average volume for Arlington Asset Investment has been 242,900 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $313.6 million and is part of the real estate industry. Shares are up 3.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Arlington Asset Investment as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow 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 24.4%. Since the same quarter one year prior, revenues slightly increased by 5.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for ARLINGTON ASSET INVESTMENT is currently very high, coming in at 118.63%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 149.59% significantly outperformed against the industry average.
  • ARLINGTON ASSET INVESTMENT has improved earnings per share by 25.0% in the most recent quarter compared to 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, ARLINGTON ASSET INVESTMENT swung to a loss, reporting -$3.02 versus $0.61 in the prior year. This year, the market expects an improvement in earnings ($3.13 versus -$3.02).
  • Net operating cash flow has declined marginally to $21.22 million or 4.26% when compared to the same quarter last year. Despite a decrease in cash flow of 4.26%, ARLINGTON ASSET INVESTMENT is still significantly exceeding the industry average of -202.54%.
  • 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, ARLINGTON ASSET INVESTMENT's return on equity significantly trails that of both the industry average and the S&P 500.

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Delek Logistics Partners

Dividend Yield: 9.40%

Delek Logistics Partners (NYSE: DKL) shares currently have a dividend yield of 9.40%.

Delek Logistics Partners, LP owns and operates logistics and marketing assets for crude oil, and intermediate and refined products in the United States. It operates in two segments, Pipelines and Transportation, and Wholesale Marketing and Terminalling. The company has a P/E ratio of 10.36.

The average volume for Delek Logistics Partners has been 58,400 shares per day over the past 30 days. Delek Logistics Partners has a market cap of $628.8 million and is part of the energy industry. Shares are down 26.6% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Delek Logistics Partners as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 10.3% when compared to the same quarter one year prior, going from $14.00 million to $15.45 million.
  • Net operating cash flow has significantly increased by 67.25% to $26.37 million when compared to the same quarter last year. In addition, DELEK LOGISTICS PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -48.95%.
  • DKL, with its decline in revenue, slightly underperformed the industry average of 24.6%. Since the same quarter one year prior, revenues fell by 27.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Looking at the price performance of DKL's shares over the past 12 months, there is not much good news to report: the stock is down 42.55%, 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.
  • DELEK LOGISTICS PARTNERS LP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, DELEK LOGISTICS PARTNERS LP reported lower earnings of $2.57 versus $2.87 in the prior year. For the next year, the market is expecting a contraction of 9.7% in earnings ($2.32 versus $2.57).

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New York Mortgage

Dividend Yield: 14.50%

New York Mortgage (NASDAQ: NYMT) shares currently have a dividend yield of 14.50%.

New York Mortgage Trust, Inc., a real estate investment trust (REIT), engages in acquiring, investing in, financing, and managing mortgage-related and financial assets in the United States. The company has a P/E ratio of 12.26.

The average volume for New York Mortgage has been 704,300 shares per day over the past 30 days. New York Mortgage has a market cap of $724.3 million and is part of the real estate industry. Shares are up 24% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates New York Mortgage as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 209.09% to $18.52 million when compared to the same quarter last year. In addition, NEW YORK MORTGAGE TRUST INC has also vastly surpassed the industry average cash flow growth rate of 11.58%.
  • NYMT, with its decline in revenue, underperformed when compared the industry average of 11.9%. Since the same quarter one year prior, revenues slightly dropped by 10.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income has significantly decreased by 28.0% when compared to the same quarter one year ago, falling from $23.54 million to $16.95 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, NEW YORK MORTGAGE TRUST INC's return on equity is below that of both the industry average and the S&P 500.

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