What To Hold: 3 Hold-Rated Dividend Stocks HP, OKE, PDM

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."

Helmerich & Payne

Dividend Yield: 4.60%

Helmerich & Payne

(NYSE:

HP

) shares currently have a dividend yield of 4.60%.

Helmerich & Payne, Inc. primarily operates as a contract drilling company in South America, the Middle East, and Africa. The company has a P/E ratio of 10.76.

The average volume for Helmerich & Payne has been 2,884,800 shares per day over the past 30 days. Helmerich & Payne has a market cap of $6.5 billion and is part of the energy industry. Shares are down 12.5% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Helmerich & Payne

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, expanding profit margins and good cash flow from operations. 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:

  • HP's debt-to-equity ratio is very low at 0.11 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.64, which clearly demonstrates the ability to cover short-term cash needs.
  • 46.69% is the gross profit margin for HELMERICH & PAYNE which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 13.77% is above that of the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 31.4%. Since the same quarter one year prior, revenues fell by 30.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 Energy Equipment & Services industry and the overall market on the basis of return on equity, HELMERICH & PAYNE has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • HELMERICH & PAYNE 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 year. We anticipate that this should continue in the coming year. During the past fiscal year, HELMERICH & PAYNE reported lower earnings of $6.46 versus $6.66 in the prior year. For the next year, the market is expecting a contraction of 53.6% in earnings ($3.00 versus $6.46).

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ONEOK

Dividend Yield: 7.30%

ONEOK

(NYSE:

OKE

) shares currently have a dividend yield of 7.30%.

ONEOK, Inc., through its general partner interests in ONEOK Partners, L.P., engages in the gathering, processing, storage, and transportation of natural gas in the United States. The company has a P/E ratio of 22.08.

The average volume for ONEOK has been 2,603,200 shares per day over the past 30 days. ONEOK has a market cap of $7.0 billion and is part of the utilities industry. Shares are down 37% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

ONEOK

as a

hold

. The company's strengths can be seen in multiple areas, such as its increase in net income, notable return on equity and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, a generally disappointing performance in the stock itself and poor profit margins.

Highlights from the ratings report include:

  • 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 27.4% when compared to the same quarter one year prior, rising from $64.46 million to $82.16 million.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, ONEOK INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • OKE, with its decline in revenue, slightly underperformed the industry average of 37.2%. Since the same quarter one year prior, revenues fell by 39.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • OKE'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 41.66%, 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.
  • The debt-to-equity ratio is very high at 21.04 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.32, which clearly demonstrates the inability to cover short-term cash needs.

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Piedmont Office Realty

Dividend Yield: 4.30%

Piedmont Office Realty

(NYSE:

PDM

) shares currently have a dividend yield of 4.30%.

Piedmont Office Realty Trust, Inc. engages in the acquisition and ownership of commercial real estate properties in the United States. Its property portfolio primarily consists of office and industrial buildings, warehouses, and manufacturing facilities. The company has a P/E ratio of 42.78.

The average volume for Piedmont Office Realty has been 1,079,400 shares per day over the past 30 days. Piedmont Office Realty has a market cap of $3.0 billion and is part of the real estate industry. Shares are up 5.2% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Piedmont Office Realty

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.

Highlights from the ratings report include:

  • PDM's revenue growth has slightly outpaced the industry average of 6.2%. Since the same quarter one year prior, revenues slightly increased by 6.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • After a year of stock price fluctuations, the net result is that PDM'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 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. In comparison to the other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, PIEDMONT OFFICE REALTY TRUST's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for PIEDMONT OFFICE REALTY TRUST is rather low; currently it is at 20.09%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 20.32% trails that of the industry average.

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