5 Hold-Rated Dividend Stocks

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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 and 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 5 stocks with substantial yields, that ultimately, we have rated "Hold."

R.R. Donnelley & Sons Company

Dividend Yield: 9.10%

R.R. Donnelley & Sons Company (NASDAQ: RRD) shares currently have a dividend yield of 9.10%.

R.R. Donnelley & Sons Company provides integrated communication solutions to private and public sectors worldwide. Currently there are 2 analysts that rate R.R. Donnelley & Sons Company a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for R.R. Donnelley & Sons Company has been 2,689,000 shares per day over the past 30 days. R.R. Donnelley & Sons Company has a market cap of $2.1 billion and is part of the diversified services industry. Shares are up 27.1% year to date as of the close of trading on Friday.

TheStreet Ratings rates R.R. Donnelley & Sons Company as a hold. Among the primary strengths of the company is its generally strong cash flow from operations. 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:
  • Net operating cash flow has increased to $522.50 million or 10.11% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -18.82%.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.7%. Since the same quarter one year prior, revenues slightly dropped by 2.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • DONNELLEY (R R) & SONS CO has exprienced 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, DONNELLEY (R R) & SONS CO reported poor results of -$3.61 versus -$0.73 in the prior year. This year, the market expects an improvement in earnings ($1.57 versus -$3.61).
  • The gross profit margin for DONNELLEY (R R) & SONS CO is rather low; currently it is at 22.00%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -31.92% is significantly below that of the industry average.
  • 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 Commercial Services & Supplies industry. The net income has significantly decreased by 159.9% when compared to the same quarter one year ago, falling from -$326.70 million to -$849.00 million.

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Penn West Petroleum

Dividend Yield: 9.00%

Penn West Petroleum (NYSE: PWE) shares currently have a dividend yield of 9.00%.

Penn West Petroleum Ltd., an exploration and production company, engages in acquiring, exploring, developing, exploiting, and holding interests in petroleum and natural gas properties and related assets in western Canada. The company has a P/E ratio of 31.51. Currently there are no analysts that rate Penn West Petroleum a buy, 2 analysts rate it a sell, and 4 rate it a hold.

The average volume for Penn West Petroleum has been 1,985,900 shares per day over the past 30 days. Penn West Petroleum has a market cap of $5.6 billion and is part of the energy industry. Shares are up 6.4% year to date as of the close of trading on Friday.

TheStreet Ratings rates Penn West Petroleum as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 2.9%. Since the same quarter one year prior, revenues rose by 21.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Oil, Gas & Consumable Fuels industry average. The net income increased by 14.5% when compared to the same quarter one year prior, going from -$62.00 million to -$53.00 million.
  • The current debt-to-equity ratio, 0.30, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.40 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The gross profit margin for PENN WEST PETROLEUM LTD is rather low; currently it is at 22.60%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -7.96% is significantly below that of the industry average.
  • Net operating cash flow has declined marginally to $441.00 million or 8.88% 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.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

Pitney Bowes

Dividend Yield: 9.90%

Pitney Bowes (NYSE: PBI) shares currently have a dividend yield of 9.90%.

Pitney Bowes Inc. provides software, hardware, and services to enable physical and digital communications in the United States and internationally. The company has a P/E ratio of 7.04. Currently there is 1 analyst that rates Pitney Bowes a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Pitney Bowes has been 3,972,000 shares per day over the past 30 days. Pitney Bowes has a market cap of $3.1 billion and is part of the consumer durables industry. Shares are up 42.6% year to date as of the close of trading on Friday.

TheStreet Ratings rates Pitney Bowes as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, 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 a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • Compared to other companies in the Commercial Services & Supplies industry and the overall market, PITNEY BOWES INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $220.56 million or 29.93% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -18.82%.
  • The gross profit margin for PITNEY BOWES INC is rather high; currently it is at 56.10%. Regardless of PBI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PBI's net profit margin of 8.57% compares favorably to the industry average.
  • 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 Commercial Services & Supplies industry. The net income has significantly decreased by 57.1% when compared to the same quarter one year ago, falling from $257.47 million to $110.34 million.
  • The debt-to-equity ratio is very high at 36.31 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, PBI maintains a poor quick ratio of 1.00, which illustrates the inability to avoid short-term cash problems.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

FirstEnergy

Dividend Yield: 5.20%

FirstEnergy (NYSE: FE) shares currently have a dividend yield of 5.20%.

FirstEnergy Corp., a diversified energy holding company, engages in the generation, transmission, and distribution of electricity in the United States. The company operates in Regulated Distribution, Regulated Transmission, and Competitive Energy Services segments. The company has a P/E ratio of 22.80. Currently there are 2 analysts that rate FirstEnergy a buy, 1 analyst rates it a sell, and 10 rate it a hold.

The average volume for FirstEnergy has been 3,541,100 shares per day over the past 30 days. FirstEnergy has a market cap of $17.5 billion and is part of the utilities industry. Shares are down 0.7% year to date as of the close of trading on Friday.

TheStreet Ratings rates FirstEnergy as a hold. Among the primary strengths of the company is its generally strong cash flow from operations. 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:
  • Net operating cash flow has increased to $1,044.00 million or 25.17% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 5.26%.
  • FE, with its decline in revenue, underperformed when compared the industry average of 13.2%. Since the same quarter one year prior, revenues fell by 10.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • FIRSTENERGY CORP has exprienced 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, FIRSTENERGY CORP reported lower earnings of $1.84 versus $2.13 in the prior year. This year, the market expects an improvement in earnings ($3.00 versus $1.84).
  • The debt-to-equity ratio of 1.46 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.18, which clearly demonstrates the inability to cover short-term cash needs.
  • 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, FIRSTENERGY CORP's return on equity is below that of both the industry average and the S&P 500.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

BP Prudhoe Bay Royalty

Dividend Yield: 11.80%

BP Prudhoe Bay Royalty (NYSE: BPT) shares currently have a dividend yield of 11.80%.

BP Prudhoe Bay Royalty Trust operates as a grantor trust in the United States. The company holds overriding royalty interests constituting a non-operational interest in minerals in the Prudhoe Bay oil field located on the North Slope in Alaska. The company has a P/E ratio of 29.67. Currently there are no analysts that rate BP Prudhoe Bay Royalty a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for BP Prudhoe Bay Royalty has been 143,400 shares per day over the past 30 days. BP Prudhoe Bay Royalty has a market cap of $1.7 billion and is part of the energy industry. Shares are up 14.3% year to date as of the close of trading on Friday.

TheStreet Ratings rates BP Prudhoe Bay Royalty 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, deteriorating net income and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • BPT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 5.72, which clearly demonstrates the ability to cover short-term cash needs.
  • 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, BP PRUDHOE BAY ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for BP PRUDHOE BAY ROYALTY TRUST is currently very high, coming in at 100.00%. BPT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, BPT's net profit margin of 99.51% significantly outperformed against the industry.
  • BP PRUDHOE BAY ROYALTY TRUST's earnings per share declined by 7.1% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, BP PRUDHOE BAY ROYALTY TRUST reported lower earnings of $9.29 versus $9.40 in the prior year.
  • 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 the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 6.9% when compared to the same quarter one year ago, dropping from $41.89 million to $38.98 million.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

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Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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