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."

Entergy

Dividend Yield: 4.80%

Entergy (NYSE: ETR) shares currently have a dividend yield of 4.80%.

Entergy Corporation, together with its subsidiaries, engages in the electric power production and retail electric distribution operations in the United States. The company generates electricity through various sources, such as gas/oil, nuclear, coal, and hydro power. The company has a P/E ratio of 14.64.

The average volume for Entergy has been 1,205,700 shares per day over the past 30 days. Entergy has a market cap of $12.4 billion and is part of the utilities industry. Shares are up 9.3% year to date as of the close of trading on Monday.

TheStreet Ratings rates Entergy as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, attractive valuation levels and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and disappointing return on equity.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electric Utilities industry. The net income increased by 88.6% when compared to the same quarter one year prior, rising from $160.03 million to $301.85 million.
  • 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.
  • Net operating cash flow has decreased to $720.50 million or 27.88% 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.
  • The debt-to-equity ratio of 1.42 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 0.31, which clearly demonstrates the inability to cover short-term cash needs.

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CenturyLink

Dividend Yield: 5.80%

CenturyLink (NYSE: CTL) shares currently have a dividend yield of 5.80%.

CenturyLink, Inc. operates as an integrated telecommunications company in the United States. The company has a P/E ratio of 24.49.

The average volume for CenturyLink has been 7,608,900 shares per day over the past 30 days. CenturyLink has a market cap of $22.9 billion and is part of the telecommunications industry. Shares are down 4.9% year to date as of the close of trading on Monday.

TheStreet Ratings rates CenturyLink as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, reasonable valuation levels 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 net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Telecommunication Services industry. The net income increased by 117.8% when compared to the same quarter one year prior, rising from $107.00 million to $233.00 million.
  • CENTURYLINK INC 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, CENTURYLINK INC reported lower earnings of $1.24 versus $1.29 in the prior year. This year, the market expects an improvement in earnings ($2.67 versus $1.24).
  • CTL has underperformed the S&P 500 Index, declining 6.64% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The debt-to-equity ratio of 1.07 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 0.47, 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.

FirstEnergy

Dividend Yield: 4.80%

FirstEnergy (NYSE: FE) shares currently have a dividend yield of 4.80%.

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 24.85.

The average volume for FirstEnergy has been 3,472,600 shares per day over the past 30 days. FirstEnergy has a market cap of $19.1 billion and is part of the utilities industry. Shares are up 9.5% year to date as of the close of trading on Monday.

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 5.09%.
  • FE, with its decline in revenue, underperformed when compared the industry average of 13.1%. 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.

Pengrowth Energy

Dividend Yield: 9.30%

Pengrowth Energy (NYSE: PGH) shares currently have a dividend yield of 9.30%.

Pengrowth Energy Corporation engages in the acquisition, exploration, development, and production of oil and natural gas reserves in Canada. The company has a P/E ratio of 167.00.

The average volume for Pengrowth Energy has been 2,519,800 shares per day over the past 30 days. Pengrowth Energy has a market cap of $2.6 billion and is part of the energy industry. Shares are down 4.4% year to date as of the close of trading on Monday.

TheStreet Ratings rates Pengrowth Energy as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and expanding profit margins. 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 generally higher debt management risk.

Highlights from the ratings report include:
  • PGH's very impressive revenue growth greatly exceeded the industry average of 1.1%. Since the same quarter one year prior, revenues leaped by 68.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 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 151.7% when compared to the same quarter one year prior, rising from -$8.97 million to $4.64 million.
  • Net operating cash flow has slightly increased to $207.68 million or 1.53% when compared to the same quarter last year. Despite an increase in cash flow, PENGROWTH ENERGY CORP's cash flow growth rate is still lower than the industry average growth rate of 20.63%.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, PENGROWTH ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • PGH'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 42.57%, 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. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, PGH is still more expensive than most of the other companies in its industry.

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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