5 Hold-Rated Dividend Stocks: NRGY, GRMN, FTR, BMO, PGH

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."

Inergy L.P

Dividend Yield: 4.90%

Inergy L.P (NYSE: NRGY) shares currently have a dividend yield of 4.90%.

Inergy, L.P., an integrated energy midstream master limited partnership, engages in the storage and transportation of natural gas and natural gas liquids (NGL) in the United States and Canada. The company has a P/E ratio of 6.11.

The average volume for Inergy L.P has been 463,400 shares per day over the past 30 days. Inergy L.P has a market cap of $3.1 billion and is part of the utilities industry. Shares are up 30.4% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Inergy L.P 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 notable return on equity. 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:
  • 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.
  • 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 132.5% when compared to the same quarter one year prior, rising from -$4.00 million to $1.30 million.
  • NRGY, with its decline in revenue, underperformed when compared the industry average of 6.7%. Since the same quarter one year prior, revenues fell by 34.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • INERGY LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, INERGY LP increased its bottom line by earning $4.21 versus $0.28 in the prior year. For the next year, the market is expecting a contraction of 95.7% in earnings ($0.18 versus $4.21).
  • The gross profit margin for INERGY LP is rather low; currently it is at 18.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.29% trails that of the industry average.

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Garmin

Dividend Yield: 5.00%

Garmin (NASDAQ: GRMN) shares currently have a dividend yield of 5.00%.

Garmin Ltd., together with its subsidiaries, designs, develops, manufactures, and markets global positioning system (GPS) enabled products and other navigation, communication, and information products for the automotive/mobile, outdoor, fitness, marine, and general aviation markets worldwide. The company has a P/E ratio of 12.89.

The average volume for Garmin has been 1,347,900 shares per day over the past 30 days. Garmin has a market cap of $7.0 billion and is part of the electronics industry. Shares are down 12.4% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Garmin 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, expanding profit margins and increase in net income. 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 weak operating cash flow.

Highlights from the ratings report include:
  • GRMN 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 2.79, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for GARMIN LTD is rather high; currently it is at 54.30%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 16.66% significantly outperformed against the industry average.
  • Despite the weak revenue results, GRMN has outperformed against the industry average of 22.5%. Since the same quarter one year prior, revenues slightly dropped by 4.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Net operating cash flow has significantly decreased to $59.36 million or 51.43% when compared to the same quarter last year. Despite a decrease in cash flow of 51.43%, GARMIN LTD is still significantly exceeding the industry average of -118.57%.
  • 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 Household Durables industry and the overall market on the basis of return on equity, GARMIN LTD has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

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Frontier Communications Corp Class B

Dividend Yield: 9.60%

Frontier Communications Corp Class B (NASDAQ: FTR) shares currently have a dividend yield of 9.60%.

Frontier Communications Corporation, a communications company, provides regulated and unregulated voice, data, and video services to business, residential, and wholesale customers in the United States. The company has a P/E ratio of 27.87.

The average volume for Frontier Communications Corp Class B has been 9,797,900 shares per day over the past 30 days. Frontier Communications Corp Class B has a market cap of $4.2 billion and is part of the telecommunications industry. Shares are down 2.3% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Frontier Communications Corp Class B as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has increased to $392.19 million or 30.71% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 19.91%.
  • 44.90% is the gross profit margin for FRONTIER COMMUNICATIONS CORP which we consider to be strong. Regardless of FTR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.01% trails 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. When compared to other companies in the Diversified Telecommunication Services industry and the overall market, FRONTIER COMMUNICATIONS CORP's return on equity is below that of both the industry average and the S&P 500.
  • 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 Diversified Telecommunication Services industry. The net income has significantly decreased by 41.1% when compared to the same quarter one year ago, falling from $42.25 million to $24.88 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.

Bank of Montreal

Dividend Yield: 4.60%

Bank of Montreal (NYSE: BMO) shares currently have a dividend yield of 4.60%.

Bank of Montreal, together with its subsidiaries, provides various retail banking, wealth management, and investment banking products and services in North America and internationally. The company has a P/E ratio of 10.40.

The average volume for Bank of Montreal has been 470,000 shares per day over the past 30 days. Bank of Montreal has a market cap of $41.2 billion and is part of the banking industry. Shares are up 3% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Bank of Montreal as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, increase in stock price during the past year and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and weak operating cash flow.

Highlights from the ratings report include:
  • 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 Commercial Banks industry and the overall market, BANK OF MONTREAL's return on equity exceeds that of both the industry average and the S&P 500.
  • 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.
  • The gross profit margin for BANK OF MONTREAL is currently very high, coming in at 83.90%. Regardless of BMO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BMO's net profit margin of 19.64% compares favorably to the industry average.
  • Net operating cash flow has significantly decreased to $10,656.00 million or 55.67% when compared to the same quarter last year. Despite a decrease in cash flow BANK OF MONTREAL is still fairing well by exceeding its industry average cash flow growth rate of -93.91%.
  • 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 Commercial Banks industry average. The net income has decreased by 5.5% when compared to the same quarter one year ago, dropping from $1,090.00 million to $1,030.00 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.

Pengrowth Energy

Dividend Yield: 9.20%

Pengrowth Energy (NYSE: PGH) shares currently have a dividend yield of 9.20%.

Pengrowth Energy Corporation engages in the acquisition, exploration, development, and production of oil and natural gas reserves in Canada.

The average volume for Pengrowth Energy has been 2,415,600 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 up 1% year to date as of the close of trading on Thursday.

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 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, 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 6.7%. 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.
  • The gross profit margin for PENGROWTH ENERGY CORP is rather high; currently it is at 64.70%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 1.28% trails 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. 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 44.50%, 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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