What To Hold: 3 Hold-Rated Dividend Stocks SJR, UFS, M

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."

Shaw Communications

Dividend Yield: 4.70%

Shaw Communications

(NYSE:

SJR

) shares currently have a dividend yield of 4.70%.

Shaw Communications Inc., together with its subsidiaries, provides broadband cable television, Internet, digital phone, telecommunication, direct-to-home satellite, satellite distribution, and programming content services to residential and business customers in Canada and the United States. The company has a P/E ratio of 14.30.

The average volume for Shaw Communications has been 581,100 shares per day over the past 30 days. Shaw Communications has a market cap of $9.4 billion and is part of the media industry. Shares are up 14% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Shaw Communications

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • SJR's revenue growth has slightly outpaced the industry average of 4.2%. Since the same quarter one year prior, revenues rose by 12.6%. 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.90, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.35 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • SHAW COMMUNICATIONS INC 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. During the past fiscal year, SHAW COMMUNICATIONS INC reported lower earnings of $1.44 versus $1.84 in the prior year.
  • 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 Media industry and the overall market, SHAW COMMUNICATIONS INC's return on equity is below that of both the industry average and the S&P 500.

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Domtar

Dividend Yield: 4.80%

Domtar

(NYSE:

UFS

) shares currently have a dividend yield of 4.80%.

Domtar Corporation designs, manufactures, markets, and distributes communications papers, specialty and packaging papers, and absorbent hygiene products in the United States, Canada, Europe, Asia, and internationally. It operates through two segments, Pulp and Paper, and Personal Care. The company has a P/E ratio of 19.94.

The average volume for Domtar has been 540,500 shares per day over the past 30 days. Domtar has a market cap of $2.2 billion and is part of the consumer non-durables industry. Shares are down 6% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Domtar

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 deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:

  • The current debt-to-equity ratio, 0.46, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.98 is somewhat weak and could be cause for future problems.
  • UFS, with its decline in revenue, slightly underperformed the industry average of 0.5%. Since the same quarter one year prior, revenues slightly dropped by 4.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for DOMTAR CORP is rather low; currently it is at 18.41%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.31% trails that of the industry average.
  • Net operating cash flow has decreased to $97.00 million or 23.62% 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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Macy's

Dividend Yield: 4.30%

Macy's

(NYSE:

M

) shares currently have a dividend yield of 4.30%.

Macy's, Inc., together with its subsidiaries, operates stores, Websites, and mobile applications in the United States. Its stores and Websites sell a range of merchandise, including apparel and accessories for men, women, and children; cosmetics; home furnishings; and other consumer goods. The company has a P/E ratio of 11.51.

The average volume for Macy's has been 7,370,100 shares per day over the past 30 days. Macy's has a market cap of $10.8 billion and is part of the retail industry. Shares are up 0.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Macy's

as a

hold

. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins and notable return on equity. 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 generally higher debt management risk.

Highlights from the ratings report include:

  • 39.07% is the gross profit margin for MACY'S INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 2.01% trails the industry average.
  • M, with its decline in revenue, underperformed when compared the industry average of 5.8%. Since the same quarter one year prior, revenues slightly dropped by 7.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Currently the debt-to-equity ratio of 1.84 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.22, which clearly demonstrates the inability to cover short-term cash needs.
  • Net operating cash flow has significantly decreased to $8.00 million or 84.90% 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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