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."

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 24.43.

The average volume for CenturyLink has been 7,675,600 shares per day over the past 30 days. CenturyLink has a market cap of $22.8 billion and is part of the telecommunications industry. Shares are down 5.3% 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 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 generally higher debt management risk.

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 ($2.66 versus $1.24).
  • Even though the current debt-to-equity ratio is 1.07, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.47 is very low and demonstrates very weak liquidity.
  • In its most recent trading session, CTL 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. 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.

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Windstream

Dividend Yield: 12.00%

Windstream (NASDAQ: WIN) shares currently have a dividend yield of 12.00%.

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 29.86.

The average volume for Windstream has been 8,179,900 shares per day over the past 30 days. Windstream has a market cap of $5.0 billion and is part of the telecommunications industry. Shares are up 1% year to date as of the close of trading on Monday.

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 increase in net income. 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 1.4%. 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'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 25.52%, 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.
  • 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.

Old Republic International

Dividend Yield: 5.30%

Old Republic International (NYSE: ORI) shares currently have a dividend yield of 5.30%.

Old Republic International Corporation, through its subsidiaries, engages in underwriting insurance products primarily in the United States and Canada.

The average volume for Old Republic International has been 1,873,800 shares per day over the past 30 days. Old Republic International has a market cap of $3.5 billion and is part of the insurance industry. Shares are up 29.3% year to date as of the close of trading on Monday.

TheStreet Ratings rates Old Republic International as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income and revenue growth. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.

Highlights from the ratings report include:
  • This stock has managed to rise its share value by 38.06% over the past twelve months. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • OLD REPUBLIC INTL CORP has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, OLD REPUBLIC INTL CORP continued to lose money by earning -$0.27 versus -$0.55 in the prior year. This year, the market expects an improvement in earnings ($0.45 versus -$0.27).
  • 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 Insurance industry and the overall market on the basis of return on equity, OLD REPUBLIC INTL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The gross profit margin for OLD REPUBLIC INTL CORP is currently extremely low, coming in at 7.10%. Regardless of ORI'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 4.42% trails the industry average.

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.

Invesco Mortgage Capital

Dividend Yield: 12.80%

Invesco Mortgage Capital (NYSE: IVR) shares currently have a dividend yield of 12.80%.

Invesco Mortgage Capital Inc., a real estate investment trust (REIT), focuses on investing in, financing, and managing residential and commercial mortgage-backed securities and mortgage loans. It invests in residential mortgage-backed securities for which a U.S. The company has a P/E ratio of 7.26.

The average volume for Invesco Mortgage Capital has been 1,863,000 shares per day over the past 30 days. Invesco Mortgage Capital has a market cap of $2.7 billion and is part of the real estate industry. Shares are up 3.8% year to date as of the close of trading on Monday.

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

Highlights from the ratings report include:
  • IVR's revenue growth has slightly outpaced the industry average of 10.1%. Since the same quarter one year prior, revenues rose by 13.4%. 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.
  • 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'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, INVESCO MORTGAGE CAPITAL INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • INVESCO MORTGAGE CAPITAL INC's earnings per share declined by 11.1% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, INVESCO MORTGAGE CAPITAL INC reported lower earnings of $2.89 versus $3.45 in the prior year. For the next year, the market is expecting a contraction of 11.1% in earnings ($2.57 versus $2.89).

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.

ArcelorMittal

Dividend Yield: 5.00%

ArcelorMittal (NYSE: MT) shares currently have a dividend yield of 5.00%.

ArcelorMittal, together with its subsidiaries, operates as an integrated steel and mining company worldwide. The company operates through six segments: Flat Carbon Americas; Flat Carbon Europe; Long Carbon Americas and Europe; Asia, Africa, and CIS; Distribution Solutions; and Mining.

The average volume for ArcelorMittal has been 7,643,000 shares per day over the past 30 days. ArcelorMittal has a market cap of $19.8 billion and is part of the metals & mining industry. Shares are down 26.8% year to date as of the close of trading on Monday.

TheStreet Ratings rates ArcelorMittal 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 $3,327.00 million or 15.60% when compared to the same quarter last year. In addition, ARCELORMITTAL SA has also vastly surpassed the industry average cash flow growth rate of -37.59%.
  • MT, with its decline in revenue, slightly underperformed the industry average of 4.0%. Since the same quarter one year prior, revenues fell by 14.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • ARCELORMITTAL SA 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, ARCELORMITTAL SA swung to a loss, reporting -$2.47 versus $0.86 in the prior year. This year, the market expects an improvement in earnings ($0.46 versus -$2.47).
  • The gross profit margin for ARCELORMITTAL SA is currently extremely low, coming in at 2.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -20.64% 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 Metals & Mining industry. The net income has significantly decreased by 298.7% when compared to the same quarter one year ago, falling from -$1,000.00 million to -$3,987.00 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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