What To Hold: 3 Hold-Rated Dividend Stocks HUN, RDS.B, ETE - 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."

Huntsman

Dividend Yield: 4.10%

Huntsman

(NYSE:

HUN

) shares currently have a dividend yield of 4.10%.

Huntsman Corporation, together with its subsidiaries, manufactures and sells differentiated organic and inorganic chemical products worldwide. The company operates in five segments: Polyurethanes, Performance Products, Advanced Materials, Textile Effects, and Pigments and Additives. The company has a P/E ratio of 55.09.

The average volume for Huntsman has been 4,793,500 shares per day over the past 30 days. Huntsman has a market cap of $3.0 billion and is part of the chemicals industry. Shares are down 44.3% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Huntsman

as a

hold

. The company's strongest point has been its expanding profit margins. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:

  • HUNTSMAN 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. 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, HUNTSMAN CORP increased its bottom line by earning $1.34 versus $0.54 in the prior year. This year, the market expects an improvement in earnings ($1.88 versus $1.34).
  • Despite the weak revenue results, HUN has outperformed against the industry average of 18.9%. Since the same quarter one year prior, revenues slightly dropped by 8.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for HUNTSMAN CORP is rather low; currently it is at 21.83%. Regardless of HUN'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 2.08% trails the industry average.
  • Net operating cash flow has decreased to $206.00 million or 42.77% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 52.73%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 71.05% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

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Royal Dutch Shell

Dividend Yield: 7.60%

Royal Dutch Shell

(NYSE:

RDS.B

) shares currently have a dividend yield of 7.60%.

Royal Dutch Shell plc operates as an independent oil and gas company worldwide. It operates through Upstream and Downstream segments. The company explores for and extracts crude oil, natural gas, and natural gas liquids. The company has a P/E ratio of 6.27.

The average volume for Royal Dutch Shell has been 1,786,600 shares per day over the past 30 days. Royal Dutch Shell has a market cap of $158.2 billion and is part of the energy industry. Shares are down 27.3% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Royal Dutch Shell

as a

hold

. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, 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, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 36.8%. Since the same quarter one year prior, revenues fell by 36.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • ROYAL DUTCH SHELL PLC 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. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ROYAL DUTCH SHELL PLC reported lower earnings of $4.70 versus $5.18 in the prior year. This year, the market expects an improvement in earnings ($6.31 versus $4.70).
  • 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 266.2% when compared to the same quarter one year ago, falling from $4,463.00 million to -$7,416.00 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 29.33%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 265.71% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

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Energy Transfer Equity

Dividend Yield: 6.00%

Energy Transfer Equity

(NYSE:

ETE

) shares currently have a dividend yield of 6.00%.

Energy Transfer Equity, L.P., through its subsidiaries, provides diversified energy-related services in the Unites States. The company has a P/E ratio of 20.66.

The average volume for Energy Transfer Equity has been 10,431,100 shares per day over the past 30 days. Energy Transfer Equity has a market cap of $19.9 billion and is part of the energy industry. Shares are down 32.7% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Energy Transfer Equity

as a

hold

. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins.

Highlights from the ratings report include:

  • ENERGY TRANSFER EQUITY LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ENERGY TRANSFER EQUITY LP increased its bottom line by earning $0.52 versus $0.15 in the prior year. This year, the market expects an improvement in earnings ($1.13 versus $0.52).
  • 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 55.9% when compared to the same quarter one year prior, rising from $188.00 million to $293.00 million.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 36.8%. Since the same quarter one year prior, revenues fell by 31.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for ENERGY TRANSFER EQUITY LP is currently extremely low, coming in at 13.53%. Regardless of ETE's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, ETE's net profit margin of 2.98% compares favorably to the industry average.
  • ETE'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 38.03%, 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.

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