4 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 4 stocks with substantial yields, that ultimately, we have rated "Hold."

American Capital Agency

Dividend Yield: 15.30%

American Capital Agency (NASDAQ: AGNC) shares currently have a dividend yield of 15.30%.

American Capital Agency Corp. operates as a real estate investment trust (REIT). The company has a P/E ratio of 7.84.

The average volume for American Capital Agency has been 5,947,400 shares per day over the past 30 days. American Capital Agency has a market cap of $13.0 billion and is part of the real estate industry. Shares are up 13.2% year to date as of the close of trading on Friday.

TheStreet Ratings rates American Capital Agency as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • AGNC's very impressive revenue growth greatly exceeded the industry average of 16.5%. Since the same quarter one year prior, revenues leaped by 98.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
  • AMERICAN CAPITAL AGENCY CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, AMERICAN CAPITAL AGENCY CORP reported lower earnings of $4.40 versus $5.22 in the prior year. For the next year, the market is expecting a contraction of 3.2% in earnings ($4.26 versus $4.40).
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, AMERICAN CAPITAL AGENCY CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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Windstream

Dividend Yield: 11.40%

Windstream (NASDAQ: WIN) shares currently have a dividend yield of 11.40%.

Windstream Corporation provides communications and technology solutions in the United States. The company offers managed services and cloud computing services to businesses, as well as broadband, voice, and video services to consumers primarily in rural markets. The company has a P/E ratio of 31.36.

The average volume for Windstream has been 8,340,200 shares per day over the past 30 days. Windstream has a market cap of $5.2 billion and is part of the telecommunications industry. Shares are up 6% year to date as of the close of trading on Friday.

TheStreet Ratings rates Windstream as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 1.2%. Since the same quarter one year prior, revenues rose by 27.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 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 Diversified Telecommunication Services industry and the overall market, WINDSTREAM CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • WINDSTREAM CORP reported significant earnings per share improvement in the most recent quarter compared to 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, WINDSTREAM CORP reported lower earnings of $0.28 versus $0.33 in the prior year. This year, the market expects an improvement in earnings ($0.45 versus $0.28).
  • WIN has underperformed the S&P 500 Index, declining 22.58% from its price level of one year ago. 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 8.14 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 0.36, which clearly demonstrates the inability to cover short-term cash needs.

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.

Banco Santander

Dividend Yield: 8.20%

Banco Santander (NYSE: SAN) shares currently have a dividend yield of 8.20%.

Banco Santander-Chile provides commercial and retail banking services to corporate and individual customers in Chile.

The average volume for Banco Santander has been 6,109,800 shares per day over the past 30 days. Banco Santander has a market cap of $71.5 billion and is part of the banking industry. Shares are down 14.3% year to date as of the close of trading on Friday.

TheStreet Ratings rates Banco Santander as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, premium valuation and deteriorating net income.

Highlights from the ratings report include:
  • SAN's revenue growth has slightly outpaced the industry average of 1.1%. Since the same quarter one year prior, revenues slightly increased by 4.9%. 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.
  • 46.60% is the gross profit margin for BANCO SANTANDER-CHILE which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, SAN's net profit margin of 16.80% compares favorably to the industry average.
  • 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. In comparison to the other companies in the Commercial Banks industry and the overall market, BANCO SANTANDER-CHILE's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • The share price of BANCO SANTANDER-CHILE has not done very well: it is down 6.64% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

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.

Exelon

Dividend Yield: 5.80%

Exelon (NYSE: EXC) shares currently have a dividend yield of 5.80%.

Exelon Corporation, a utility services holding company, engages in the energy generation and distribution business in the United States. The company has a P/E ratio of 25.48.

The average volume for Exelon has been 7,275,400 shares per day over the past 30 days. Exelon has a market cap of $31.0 billion and is part of the utilities industry. Shares are up 21.8% year to date as of the close of trading on Friday.

TheStreet Ratings rates Exelon as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth 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 revenue growth greatly exceeded the industry average of 13.1%. Since the same quarter one year prior, revenues rose by 44.2%. 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. Despite the fact that EXC's debt-to-equity ratio is low, the quick ratio, which is currently 0.57, displays a potential problem in covering short-term cash needs.
  • EXELON 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, EXELON CORP reported lower earnings of $1.40 versus $3.75 in the prior year. This year, the market expects an improvement in earnings ($2.49 versus $1.40).
  • The gross profit margin for EXELON CORP is rather low; currently it is at 20.80%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 6.01% trails that of the industry average.
  • Net operating cash flow has decreased to $1,574.00 million or 18.69% 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.

Other helpful dividend tools from TheStreet:

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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