3 Hold-Rated Dividend Stocks: ATLS, IEP, OAK
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." Atlas Energy (NYSE: ATLS) shares currently have a dividend yield of 4.20%. Atlas Energy, L.P. develops and produces natural gas, crude oil, and natural gas liquids (NGLs) in basins across the United States. It also sponsors and manages tax-advantaged investment partnerships. The average volume for Atlas Energy has been 556,700 shares per day over the past 30 days. Atlas Energy has a market cap of $2.3 billion and is part of the energy industry. Shares are down 8.4% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Atlas Energy as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- ATLS's very impressive revenue growth greatly exceeded the industry average of 3.2%. Since the same quarter one year prior, revenues leaped by 66.5%. 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 significantly increased by 97.96% to -$0.44 million when compared to the same quarter last year. In addition, ATLAS ENERGY LP has also vastly surpassed the industry average cash flow growth rate of 17.65%.
- ATLAS ENERGY LP's earnings per share declined by 8.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ATLAS ENERGY LP reported poor results of -$1.48 versus -$1.02 in the prior year. This year, the market expects an improvement in earnings ($1.60 versus -$1.48).
- The debt-to-equity ratio is very high at 8.16 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, ATLS has a quick ratio of 0.60, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ATLAS ENERGY LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Atlas Energy Ratings Report.
- Compared to its closing price of one year ago, IEP's share price has jumped by 41.36%, 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.
- ICAHN ENTERPRISES LP 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. 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, ICAHN ENTERPRISES LP increased its bottom line by earning $8.98 versus $3.72 in the prior year. This year, the market expects an improvement in earnings ($9.41 versus $8.98).
- The gross profit margin for ICAHN ENTERPRISES LP is rather low; currently it is at 20.18%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -0.58% trails that of the industry average.
- Net operating cash flow has significantly decreased to -$802.00 million or 2056.09% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Icahn Ratings Report.
- 37.09% is the gross profit margin for OAKTREE CAPITAL GROUP LLC which we consider to be strong. Regardless of OAK'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 12.70% trails the industry average.
- OAK, with its decline in revenue, slightly underperformed the industry average of 5.2%. Since the same quarter one year prior, revenues fell by 11.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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, OAKTREE CAPITAL GROUP LLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$984.27 million or 143.60% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Capital Markets industry. The net income has decreased by 10.0% when compared to the same quarter one year ago, dropping from $57.57 million to $51.79 million.
- You can view the full Oaktree Capital Group Ratings Report.
- Our dividend calendar.
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