3 Hold-Rated Dividend Stocks: CNSL, BGSF, EVOL - TheStreet

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."

Consolidated Communications

Dividend Yield: 7.10%

Consolidated Communications

(NASDAQ:

CNSL

) shares currently have a dividend yield of 7.10%.

Consolidated Communications Holdings, Inc., through its subsidiaries, provides various integrated communications services to residential and business clients.

The average volume for Consolidated Communications has been 189,500 shares per day over the past 30 days. Consolidated Communications has a market cap of $1.1 billion and is part of the telecommunications industry. Shares are down 21.7% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Consolidated Communications

as a

hold

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 9.3%. Since the same quarter one year prior, revenues rose by 30.1%. 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 significantly increased by 55.05% to $71.82 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 15.08%.
  • The gross profit margin for CONSOLIDATED COMM HLDGS INC is rather high; currently it is at 57.10%. Regardless of CNSL'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 1.33% trails the industry average.
  • The debt-to-equity ratio is very high at 5.34 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, CNSL maintains a poor quick ratio of 0.80, which illustrates the inability to avoid short-term cash problems.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, CONSOLIDATED COMM HLDGS INC's return on equity significantly trails that of both the industry average and the S&P 500.

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BG Staffing

Dividend Yield: 7.40%

BG Staffing

(AMEX:

BGSF

) shares currently have a dividend yield of 7.40%.

BG Staffing, Inc. operates as a temporary staffing company in the United States. It operates through three segments: Light Industrial, Multifamily, and IT Staffing. The company has a P/E ratio of 22.30.

The average volume for BG Staffing has been 5,300 shares per day over the past 30 days. BG Staffing has a market cap of $100.4 million and is part of the diversified services industry. Shares are up 7.7% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

BG Staffing

as a

hold

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. 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:

  • The revenue growth came in higher than the industry average of 1.9%. Since the same quarter one year prior, revenues rose by 25.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.98, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, BGSF has a quick ratio of 1.89, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has significantly increased by 249.13% to $2.02 million when compared to the same quarter last year. In addition, BG STAFFING INC has also vastly surpassed the industry average cash flow growth rate of 32.77%.
  • The gross profit margin for BG STAFFING INC is rather low; currently it is at 23.03%. Regardless of BGSF'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 3.68% trails the industry average.

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Evolving Systems

Dividend Yield: 7.80%

Evolving Systems

(NASDAQ:

EVOL

) shares currently have a dividend yield of 7.80%.

Evolving Systems, Inc. provides software solutions and services to the wireless, wireline, and cable markets in the United Kingdom, Nigeria, Mexico, and internationally. The company has a P/E ratio of 17.12.

The average volume for Evolving Systems has been 67,500 shares per day over the past 30 days. Evolving Systems has a market cap of $66.1 million and is part of the computer software & services industry. Shares are down 39.7% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Evolving Systems

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 reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • EVOL's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, EVOL has a quick ratio of 2.01, which demonstrates the ability of the company to cover short-term liquidity 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 Software industry and the overall market, EVOLVING SYSTEMS INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for EVOLVING SYSTEMS INC is currently very high, coming in at 74.93%. 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 12.84% trails the industry average.
  • Net operating cash flow has declined marginally to $0.31 million or 5.23% when compared to the same quarter last year. Despite a decrease in cash flow of 5.23%, EVOLVING SYSTEMS INC is in line with the industry average cash flow growth rate of -8.89%.
  • 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 Software industry. The net income has significantly decreased by 53.5% when compared to the same quarter one year ago, falling from $1.68 million to $0.78 million.

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