3 Hold-Rated Dividend Stocks: ATW, RDS.B, ETE

These 3 dividend stocks are rated a Hold by TheStreet
By TheStreet Wire ,

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."

Atwood Oceanics

Dividend Yield: 5.80%

Atwood Oceanics

(NYSE:

ATW

) shares currently have a dividend yield of 5.80%.

Atwood Oceanics, Inc., an offshore drilling contractor, engages in the drilling and completion of exploratory and developmental oil and gas wells worldwide. The company has a P/E ratio of 2.87.

The average volume for Atwood Oceanics has been 3,197,100 shares per day over the past 30 days. Atwood Oceanics has a market cap of $1.1 billion and is part of the energy industry. Shares are down 40.2% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Atwood Oceanics

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and notable return on equity. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 31.2%. Since the same quarter one year prior, revenues rose by 12.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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. Compared to other companies in the Energy Equipment & Services industry and the overall market, ATWOOD OCEANICS's return on equity exceeds that of both the industry average and the S&P 500.
  • ATW's debt-to-equity ratio of 0.61 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. Despite the fact that ATW's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.24 is high and demonstrates strong liquidity.
  • ATW's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 53.03%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • Net operating cash flow has decreased to $133.86 million or 22.51% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, ATWOOD OCEANICS has marginally lower results.

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Royal Dutch Shell

Dividend Yield: 7.20%

Royal Dutch Shell

(NYSE:

RDS.B

) shares currently have a dividend yield of 7.20%.

Royal Dutch Shell plc operates as an independent oil and gas company worldwide. It operates through Upstream and Downstream segments. The company explores for and extracts crude oil, natural gas, and natural gas liquids. The company has a P/E ratio of 6.61.

The average volume for Royal Dutch Shell has been 1,898,400 shares per day over the past 30 days. Royal Dutch Shell has a market cap of $166.5 billion and is part of the energy industry. Shares are down 25.2% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Royal Dutch Shell

as a

hold

. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:

  • The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 37.2%. Since the same quarter one year prior, revenues fell by 36.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • ROYAL DUTCH SHELL PLC 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ROYAL DUTCH SHELL PLC reported lower earnings of $4.70 versus $5.18 in the prior year. This year, the market expects an improvement in earnings ($7.25 versus $4.70).
  • 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 266.2% when compared to the same quarter one year ago, falling from $4,463.00 million to -$7,416.00 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.37%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 265.71% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

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Energy Transfer Equity

Dividend Yield: 5.70%

Energy Transfer Equity

(NYSE:

ETE

) shares currently have a dividend yield of 5.70%.

Energy Transfer Equity, L.P., through its subsidiaries, provides diversified energy-related services in the Unites States. The company has a P/E ratio of 21.86.

The average volume for Energy Transfer Equity has been 9,346,700 shares per day over the past 30 days. Energy Transfer Equity has a market cap of $21.2 billion and is part of the energy industry. Shares are down 32.3% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Energy Transfer Equity

as a

hold

. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins.

Highlights from the ratings report include:

  • ENERGY TRANSFER EQUITY LP reported significant earnings per share improvement 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, ENERGY TRANSFER EQUITY LP increased its bottom line by earning $0.52 versus $0.15 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $0.52).
  • 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 55.9% when compared to the same quarter one year prior, rising from $188.00 million to $293.00 million.
  • Despite the weak revenue results, ETE has outperformed against the industry average of 36.9%. Since the same quarter one year prior, revenues fell by 26.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for ENERGY TRANSFER EQUITY LP is currently extremely low, coming in at 12.52%. Regardless of ETE's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, ETE's net profit margin of 2.75% compares favorably to the industry average.
  • ETE's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 32.72%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. 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.

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