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."

Valassis Communications

Dividend Yield: 4.90%

Valassis Communications (NYSE: VCI) shares currently have a dividend yield of 4.90%.

Valassis Communications, Inc., together with its subsidiaries, provides media solutions primarily in the United States and Europe. The company has a P/E ratio of 9.18.

The average volume for Valassis Communications has been 450,300 shares per day over the past 30 days. Valassis Communications has a market cap of $999.4 million and is part of the media industry. Shares are down 1.2% year to date as of the close of trading on Friday.

TheStreet Ratings rates Valassis Communications as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, solid stock price performance 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 and poor profit margins.

Highlights from the ratings report include:
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
  • 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 greatly underperformed compared to the Media industry average. The net income has decreased by 18.0% when compared to the same quarter one year ago, dropping from $26.42 million to $21.67 million.
  • The gross profit margin for VALASSIS COMMUNICATIONS INC is currently lower than what is desirable, coming in at 27.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.49% trails that of the industry average.

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STMicroelectronics

Dividend Yield: 4.10%

STMicroelectronics (NYSE: STM) shares currently have a dividend yield of 4.10%.

STMicroelectronics N.V., an independent semiconductor company, engages in the design, development, manufacture, and marketing of a range of semiconductor integrated circuits and discrete devices.

The average volume for STMicroelectronics has been 1,651,800 shares per day over the past 30 days. STMicroelectronics has a market cap of $7.3 billion and is part of the electronics industry. Shares are up 14.2% year to date as of the close of trading on Friday.

TheStreet Ratings rates STMicroelectronics as a hold. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, largely solid financial position with reasonable debt levels by most measures 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 disappointing return on equity.

Highlights from the ratings report include:
  • 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.
  • STM's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.91 is somewhat weak and could be cause for future problems.
  • 47.40% is the gross profit margin for STMICROELECTRONICS NV which we consider to be strong. Regardless of STM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, STM's net profit margin of -3.50% significantly underperformed when compared to the industry average.
  • STMICROELECTRONICS NV 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. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, STMICROELECTRONICS NV reported lower earnings of $0.72 versus $0.91 in the prior year. For the next year, the market is expecting a contraction of 111.1% in earnings (-$0.08 versus $0.72).
  • 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 Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 118.1% when compared to the same quarter one year ago, falling from $420.00 million to -$76.00 million.

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Cablevision Systems

Dividend Yield: 4.10%

Cablevision Systems (NYSE: CVC) shares currently have a dividend yield of 4.10%.

Cablevision Systems Corporation provides telecommunications and media services. It operates in two segments, Telecommunications Services and Other. The company has a P/E ratio of 120.67.

The average volume for Cablevision Systems has been 3,567,000 shares per day over the past 30 days. Cablevision Systems has a market cap of $3.1 billion and is part of the media industry. Shares are down 0.9% year to date as of the close of trading on Friday.

TheStreet Ratings rates Cablevision Systems as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including relatively poor performance when compared with the S&P 500 during the past year and feeble growth in the company's earnings per share.

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 Media industry. The net income increased by 92.2% when compared to the same quarter one year prior, rising from $60.63 million to $116.54 million.
  • Net operating cash flow has slightly increased to $533.19 million or 6.88% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -6.70%.
  • 45.20% is the gross profit margin for CABLEVISION SYS CORP 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, the net profit margin of 7.00% trails the industry average.
  • CABLEVISION SYS 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, CABLEVISION SYS CORP reported lower earnings of $0.13 versus $0.84 in the prior year. This year, the market expects an improvement in earnings ($0.44 versus $0.13).
  • In its most recent trading session, CVC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.

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.

Two Harbors Investment

Dividend Yield: 11.00%

Two Harbors Investment (NYSE: TWO) shares currently have a dividend yield of 11.00%.

Two Harbors Investment Corp. operates as a real estate investment trust (REIT) that focuses on investing in, financing, and managing residential mortgage-backed securities (RMBS), residential mortgage loans, and other financial assets. The company has a P/E ratio of 9.90.

The average volume for Two Harbors Investment has been 7,538,200 shares per day over the past 30 days. Two Harbors Investment has a market cap of $4.2 billion and is part of the real estate industry. Shares are up 6.5% year to date as of the close of trading on Friday.

TheStreet Ratings rates Two Harbors Investment 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 weak operating cash flow.

Highlights from the ratings report include:
  • TWO's very impressive revenue growth greatly exceeded the industry average of 16.4%. Since the same quarter one year prior, revenues leaped by 255.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
  • TWO HARBORS INVESTMENT 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, TWO HARBORS INVESTMENT CORP reported lower earnings of $1.11 versus $1.27 in the prior year. This year, the market expects an improvement in earnings ($1.28 versus $1.11).
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, TWO HARBORS INVESTMENT CORP's return on equity is below that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to $0.14 million or 99.77% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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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