What To Hold: Top 5 Hold-Rated Dividend Stocks: PBI, ISIL, RWT, EEP, HCN
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 and 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 5 stocks with substantial yields, that ultimately, we have rated "Hold." Pitney Bowes (NYSE: PBI) shares currently have a dividend yield of 4.40%. Pitney Bowes Inc. provides software, hardware, and services to enable physical and digital communications in the United States and internationally. The company has a P/E ratio of 12.64. The average volume for Pitney Bowes has been 4,968,500 shares per day over the past 30 days. Pitney Bowes has a market cap of $3.5 billion and is part of the consumer durables industry. Shares are up 58.3% year to date as of the close of trading on Tuesday. TheStreet Ratings rates Pitney Bowes as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and generally higher debt management risk. Highlights from the ratings report include:
- Compared to its closing price of one year ago, PBI's share price has jumped by 27.05%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Commercial Services & Supplies industry and the overall market, PITNEY BOWES INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for PITNEY BOWES INC is rather high; currently it is at 57.22%. Regardless of PBI'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 -0.79% trails 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 Commercial Services & Supplies industry. The net income has significantly decreased by 109.3% when compared to the same quarter one year ago, falling from $99.62 million to -$9.23 million.
- Net operating cash flow has decreased to $146.88 million or 46.42% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full Pitney Bowes Ratings Report.
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