3 Hold-Rated Dividend Stocks: TRGP, SBRA, APO

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."

Targa Resources

Dividend Yield: 9.00%

Targa Resources (NYSE: TRGP) shares currently have a dividend yield of 9.00%.

Targa Resources Corp., through its general and limited partner interests in Targa Resources Partners LP, provides midstream natural gas and natural gas liquid (NGL) services in the United States. The company operates in two divisions, Gathering and Processing, and Logistics and Marketing. The company has a P/E ratio of 42.01.

The average volume for Targa Resources has been 2,372,500 shares per day over the past 30 days. Targa Resources has a market cap of $6.5 billion and is part of the energy industry. Shares are up 43.6% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Targa Resources as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 24.0%. Since the same quarter one year prior, revenues fell by 14.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • TRGP's debt-to-equity ratio of 0.89 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 0.78 is weak.
  • TARGA RESOURCES CORP 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. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, TARGA RESOURCES CORP reported lower earnings of $1.05 versus $2.44 in the prior year. For the next year, the market is expecting a contraction of 106.2% in earnings (-$0.07 versus $1.05).
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 184.4% when compared to the same quarter one year ago, falling from $3.20 million to -$2.70 million.

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Sabra Health Care REIT

Dividend Yield: 7.00%

Sabra Health Care REIT (NASDAQ: SBRA) shares currently have a dividend yield of 7.00%.

Sabra Health Care REIT, Inc. operates as a real estate investment trust in the United States. The company, through its subsidiaries, owns and invests in real estate properties for the healthcare industry. The company has a P/E ratio of 21.77.

The average volume for Sabra Health Care REIT has been 545,400 shares per day over the past 30 days. Sabra Health Care REIT has a market cap of $1.6 billion and is part of the real estate industry. Shares are up 17.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Sabra Health Care REIT as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable 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:
  • SBRA's revenue growth has slightly outpaced the industry average of 12.1%. Since the same quarter one year prior, revenues rose by 12.6%. 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.
  • Net operating cash flow has remained constant at $24.73 million with no significant change when compared to the same quarter last year. This quarter, SABRA HEALTH CARE REIT INC's cash flow growth rate has remained relatively unchanged and is slightly below 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 180.8% when compared to the same quarter one year ago, falling from $19.45 million to -$15.71 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, SABRA HEALTH CARE REIT INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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Apollo Global Management

Dividend Yield: 6.00%

Apollo Global Management (NYSE: APO) shares currently have a dividend yield of 6.00%.

Apollo Global Management, LLC is a publicly owned investment manager. It primarily provides its services to endowment and sovereign wealth funds, as well as other institutional and individual investors. The firm manages client focused portfolios. The company has a P/E ratio of 50.15.

The average volume for Apollo Global Management has been 738,400 shares per day over the past 30 days. Apollo Global Management has a market cap of $6.6 billion and is part of the financial services industry. Shares are up 8.6% year-to-date as of the close of trading on Monday.

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

Highlights from the ratings report include:
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market, APOLLO GLOBAL MANAGEMENT LLC's return on equity exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 126.47% to $124.19 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 100.83%.
  • APO, with its very weak revenue results, has greatly underperformed against the industry average of 13.7%. Since the same quarter one year prior, revenues plummeted by 60.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The share price of APOLLO GLOBAL MANAGEMENT LLC has not done very well: it is down 24.67% 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. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

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