What To Hold: 3 Hold-Rated Dividend Stocks ETR, POT, FTR

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."

Entergy

Dividend Yield: 4.90%

Entergy

(NYSE:

ETR

) shares currently have a dividend yield of 4.90%.

Entergy Corporation, together with its subsidiaries, engages in the electric power production and retail electric distribution operations in the United States. It operates in two segments, Utility and Entergy Wholesale Commodities. The company has a P/E ratio of 15.31.

The average volume for Entergy has been 1,490,100 shares per day over the past 30 days. Entergy has a market cap of $12.1 billion and is part of the utilities industry. Shares are down 22.1% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Entergy

as a

hold

. The company's strongest point has been its expanding profit margins. At the same time, however, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:

  • ENTERGY CORP's earnings per share declined by 20.9% in the most recent quarter compared to 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, ENTERGY CORP increased its bottom line by earning $5.22 versus $3.98 in the prior year. This year, the market expects an improvement in earnings ($5.35 versus $5.22).
  • ETR, with its decline in revenue, slightly underperformed the industry average of 0.5%. Since the same quarter one year prior, revenues slightly dropped by 9.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for ENTERGY CORP is currently lower than what is desirable, coming in at 29.05%. Regardless of ETR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.66% 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. When compared to other companies in the Electric Utilities industry and the overall market, ENTERGY CORP's return on equity is below that of both the industry average and the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Electric Utilities industry average. The net income has decreased by 20.9% when compared to the same quarter one year ago, dropping from $194.28 million to $153.72 million.

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Potash Corp of Saskatchewan

Dividend Yield: 7.30%

Potash Corp of Saskatchewan

(NYSE:

POT

) shares currently have a dividend yield of 7.30%.

Potash Corporation of Saskatchewan Inc., together with its subsidiaries, produces and sells fertilizers and related industrial and feed products worldwide. The company operates in three segments: Potash, Nitrogen, and Phosphate. The company has a P/E ratio of 11.71.

The average volume for Potash Corp of Saskatchewan has been 6,500,000 shares per day over the past 30 days. Potash Corp of Saskatchewan has a market cap of $17.3 billion and is part of the chemicals industry. Shares are down 42.7% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Potash Corp of Saskatchewan

as a

hold

. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity 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, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • The current debt-to-equity ratio, 0.48, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that POT's debt-to-equity ratio is low, the quick ratio, which is currently 0.60, displays a potential problem in covering short-term cash needs.
  • 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 Chemicals industry and the overall market on the basis of return on equity, POTASH CORP SASK INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • 39.11% is the gross profit margin for POTASH CORP SASK INC which we consider to be strong. Regardless of POT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, POT's net profit margin of 18.44% compares favorably to the industry average.
  • POTASH CORP SASK INC's earnings per share declined by 10.5% in the most recent quarter compared to 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, POTASH CORP SASK INC reported lower earnings of $1.83 versus $2.03 in the prior year. For the next year, the market is expecting a contraction of 4.9% in earnings ($1.74 versus $1.83).
  • Net operating cash flow has decreased to $358.00 million or 37.63% 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.

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Frontier Communications

Dividend Yield: 8.20%

Frontier Communications

(NASDAQ:

FTR

) shares currently have a dividend yield of 8.20%.

Frontier Communications Corporation, a communications company, provides regulated and unregulated voice, data, and video services to residential, business, and wholesale customers in the United States.

The average volume for Frontier Communications has been 19,981,400 shares per day over the past 30 days. Frontier Communications has a market cap of $6.0 billion and is part of the telecommunications industry. Shares are down 22.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Frontier Communications

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 1.7%. Since the same quarter one year prior, revenues rose by 19.2%. 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 increased to $367.00 million or 11.80% when compared to the same quarter last year. In addition, FRONTIER COMMUNICATIONS CORP has also modestly surpassed the industry average cash flow growth rate of 4.80%.
  • Despite the current debt-to-equity ratio of 1.58, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 2.58 is very high and demonstrates very strong liquidity.
  • 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 Diversified Telecommunication Services industry. The net income has significantly decreased by 174.3% when compared to the same quarter one year ago, falling from $37.68 million to -$28.00 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. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, FRONTIER COMMUNICATIONS CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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