3 Hold-Rated Dividend Stocks: TRGP, CF, CM

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."

Targa Resources

Dividend Yield: 8.60%

Targa Resources

(NYSE:

TRGP

) shares currently have a dividend yield of 8.60%.

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 44.49.

The average volume for Targa Resources has been 2,703,600 shares per day over the past 30 days. Targa Resources has a market cap of $6.8 billion and is part of the energy industry. Shares are up 64.2% year-to-date as of the close of trading on Tuesday.

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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 107.1% in earnings (-$0.08 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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CF Industries Holdings

Dividend Yield: 4.80%

CF Industries Holdings

(NYSE:

CF

) shares currently have a dividend yield of 4.80%.

CF Industries Holdings, Inc. manufactures and distributes nitrogen fertilizers and other nitrogen products worldwide. The company operates through Ammonia, Granular Urea, UAN, AN, Other, and Phosphate segments. The company has a P/E ratio of 5.39.

The average volume for CF Industries Holdings has been 4,758,600 shares per day over the past 30 days. CF Industries Holdings has a market cap of $5.8 billion and is part of the chemicals industry. Shares are down 36.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

CF Industries Holdings

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and expanding profit margins. 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 weak operating cash flow.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 5.9%. Since the same quarter one year prior, revenues slightly increased by 5.3%. 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.
  • 36.16% is the gross profit margin for CF INDUSTRIES HOLDINGS INC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.58% 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 Chemicals industry. The net income has significantly decreased by 88.7% when compared to the same quarter one year ago, falling from $230.60 million to $26.00 million.
  • Net operating cash flow has decreased to $346.00 million or 34.82% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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Canadian Imperial Bank of Commerce

Dividend Yield: 5.10%

Canadian Imperial Bank of Commerce

(NYSE:

CM

) shares currently have a dividend yield of 5.10%.

Canadian Imperial Bank of Commerce, a diversified financial institution, provides various financial products and services to individuals and small businesses; and commercial, corporate, and institutional clients in Canada and internationally. The company has a P/E ratio of 10.26.

The average volume for Canadian Imperial Bank of Commerce has been 425,500 shares per day over the past 30 days. Canadian Imperial Bank of Commerce has a market cap of $29.4 billion and is part of the banking industry. Shares are up 14.8% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Canadian Imperial Bank of Commerce

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and good cash flow from operations. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:

  • CM's revenue growth has slightly outpaced the industry average of 0.0%. Since the same quarter one year prior, revenues slightly increased by 7.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Commercial Banks industry average. The net income increased by 3.2% when compared to the same quarter one year prior, going from $907.00 million to $936.00 million.
  • After a year of stock price fluctuations, the net result is that CM'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. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • The gross profit margin for CANADIAN IMPERIAL BANK is currently very high, coming in at 75.53%. Regardless of CM'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 20.72% trails the industry average.
  • 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. Compared to other companies in the Commercial Banks industry and the overall market, CANADIAN IMPERIAL BANK's return on equity exceeds that of both the industry average and the S&P 500.

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