3 Hold-Rated Dividend Stocks: ATAX, CMTL, KNOP

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."

America First Multifamily Investors

Dividend Yield: 9.00%

America First Multifamily Investors (NASDAQ: ATAX) shares currently have a dividend yield of 9.00%.

America First Multifamily Investors, L.P. acquires, holds, sells, and deals in a portfolio of mortgage revenue bonds that have been issued to provide construction or permanent financing for multifamily and student housing, and commercial properties. The company has a P/E ratio of 16.35.

The average volume for America First Multifamily Investors has been 132,100 shares per day over the past 30 days. America First Multifamily Investors has a market cap of $335.0 million and is part of the real estate industry. Shares are up 10.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates America First Multifamily Investors as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income and expanding profit margins. 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 9.1%. Since the same quarter one year prior, revenues rose by 19.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Thrifts & Mortgage Finance industry average. The net income increased by 0.3% when compared to the same quarter one year prior, going from $2.52 million to $2.53 million.
  • Net operating cash flow has increased to $4.87 million or 16.63% when compared to the same quarter last year. Despite an increase in cash flow of 16.63%, AMERICA FIRST MULTIFAMILY-LP is still growing at a significantly lower rate than the industry average of 131.03%.
  • After a year of stock price fluctuations, the net result is that ATAX'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. 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.
  • 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 Thrifts & Mortgage Finance industry and the overall market, AMERICA FIRST MULTIFAMILY-LP's return on equity is below that of both the industry average and the S&P 500.

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Comtech Telecommunications

Dividend Yield: 9.10%

Comtech Telecommunications (NASDAQ: CMTL) shares currently have a dividend yield of 9.10%.

Comtech Telecommunications Corp. designs, develops, produces, and markets products, systems, and services for communications solutions in the United States and internationally.

The average volume for Comtech Telecommunications has been 352,900 shares per day over the past 30 days. Comtech Telecommunications has a market cap of $212.2 million and is part of the telecommunications industry. Shares are down 33.4% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Comtech Telecommunications as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, 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:
  • CMTL's very impressive revenue growth greatly exceeded the industry average of 0.4%. Since the same quarter one year prior, revenues leaped by 73.4%. 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.
  • CMTL's debt-to-equity ratio of 0.92 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.34 is sturdy.
  • 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 Communications Equipment industry. The net income has significantly decreased by 389.4% when compared to the same quarter one year ago, falling from $4.96 million to -$14.36 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 Communications Equipment industry and the overall market on the basis of return on equity, COMTECH TELECOMMUN underperformed against that of the industry average and is significantly less than that of the S&P 500.

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KNOT Offshore Partners

Dividend Yield: 11.40%

KNOT Offshore Partners (NYSE: KNOP) shares currently have a dividend yield of 11.40%.

KNOT Offshore Partners LP owns and operates shuttle tankers under long-term charters in the North Sea and Brazil. The company provides crude oil loading, transportation, and storage services under time charters and bareboat charters. As of March 18, 2016, it had a fleet of 10 shuttle tankers. The company has a P/E ratio of 12.12.

The average volume for KNOT Offshore Partners has been 61,300 shares per day over the past 30 days. KNOT Offshore Partners has a market cap of $494.4 million and is part of the transportation industry. Shares are up 35.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates KNOT Offshore Partners 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 find that the company has favored debt over equity in the management of its balance sheet.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 24.0%. Since the same quarter one year prior, revenues rose by 15.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • KNOT OFFSHORE PRTNRS LP has improved earnings per share by 21.9% 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, KNOT OFFSHORE PRTNRS LP increased its bottom line by earning $1.57 versus $1.34 in the prior year. This year, the market expects an improvement in earnings ($1.75 versus $1.57).
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, KNOT OFFSHORE PRTNRS LP's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • After a year of stock price fluctuations, the net result is that KNOP'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. 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 debt-to-equity ratio of 1.28 is relatively high when compared with the industry average, suggesting a need for better debt level management.

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