5 Hold-Rated Dividend Stocks: MT, HTS, RY, BP, PBI

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."

ArcelorMittal

Dividend Yield: 5.40%

ArcelorMittal (NYSE: MT) shares currently have a dividend yield of 5.40%.

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 7,673,600 shares per day over the past 30 days. ArcelorMittal has a market cap of $19.7 billion and is part of the metals & mining industry. Shares are down 28.6% year to date as of the close of trading on Thursday.

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.

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Hatteras Financial Corporation

Dividend Yield: 10.70%

Hatteras Financial Corporation (NYSE: HTS) shares currently have a dividend yield of 10.70%.

Hatteras Financial Corp. operates as an externally-managed mortgage real estate investment trust (REIT) in the United States. The company has a P/E ratio of 7.68.

The average volume for Hatteras Financial Corporation has been 731,300 shares per day over the past 30 days. Hatteras Financial Corporation has a market cap of $2.6 billion and is part of the real estate industry. Shares are up 7.5% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Hatteras Financial Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, unimpressive growth in net income and disappointing return on equity.

Highlights from the ratings report include:
  • HTS's revenue growth has slightly outpaced the industry average of 9.6%. Since the same quarter one year prior, revenues rose by 10.0%. 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 gross profit margin for HATTERAS FINANCIAL CORP is currently very high, coming in at 94.70%. Regardless of HTS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HTS's net profit margin of 52.86% significantly outperformed against the industry.
  • The share price of HATTERAS FINANCIAL CORP has not done very well: it is down 7.27% 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. 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.
  • HATTERAS FINANCIAL CORP's earnings per share declined by 30.3% 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, HATTERAS FINANCIAL CORP reported lower earnings of $3.65 versus $3.96 in the prior year. For the next year, the market is expecting a contraction of 28.1% in earnings ($2.63 versus $3.65).

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Royal Bank Of Canada

Dividend Yield: 4.10%

Royal Bank Of Canada (NYSE: RY) shares currently have a dividend yield of 4.10%.

Royal Bank of Canada provides personal and commercial banking, wealth management, insurance, investor and treasury, and capital markets services worldwide. The company has a P/E ratio of 11.71.

The average volume for Royal Bank Of Canada has been 623,900 shares per day over the past 30 days. Royal Bank Of Canada has a market cap of $86.6 billion and is part of the banking industry. Shares are down 0.7% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Royal Bank Of Canada as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and growth in earnings per share. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.

Highlights from the ratings report include:
  • RY's revenue growth has slightly outpaced the industry average of 3.8%. Since the same quarter one year prior, revenues slightly increased by 1.7%. Growth in the company's revenue appears to have helped boost 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 Commercial Banks industry and the overall market, ROYAL BANK OF CANADA's return on equity exceeds that of both the industry average and the S&P 500.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • Net operating cash flow has significantly decreased to -$3,397.00 million or 376.62% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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BP

Dividend Yield: 5.00%

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

BP p.l.c. provides fuel for transportation, energy for heat and light, lubricants to engines, and petrochemicals products. The company has a P/E ratio of 429.80.

The average volume for BP has been 6,757,400 shares per day over the past 30 days. BP has a market cap of $136.6 billion and is part of the energy industry. Shares are up 2.7% year to date as of the close of trading on Thursday.

TheStreet Ratings rates BP as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and good cash flow from operations. 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:
  • BP's revenue growth has slightly outpaced the industry average of 0.7%. Since the same quarter one year prior, revenues slightly increased by 4.5%. 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.
  • Despite currently having a low debt-to-equity ratio of 0.41, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.75 is weak.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, BP PLC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for BP PLC is currently extremely low, coming in at 9.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.65% trails that of the industry average.

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Pitney Bowes

Dividend Yield: 5.10%

Pitney Bowes (NYSE: PBI) shares currently have a dividend yield of 5.10%.

Pitney Bowes Inc. provides software, hardware, and services to enable physical and digital communications in the United States and internationally. The company has a P/E ratio of 8.21.

The average volume for Pitney Bowes has been 4,122,800 shares per day over the past 30 days. Pitney Bowes has a market cap of $3.0 billion and is part of the consumer durables industry. Shares are up 38.3% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Pitney Bowes as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and feeble growth in the company's earnings per share.

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 Services & Supplies industry and the overall market, PITNEY BOWES INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $132.16 million or 37.67% when compared to the same quarter last year. In addition, PITNEY BOWES INC has also vastly surpassed the industry average cash flow growth rate of -23.58%.
  • The gross profit margin for PITNEY BOWES INC is rather high; currently it is at 55.10%. Regardless of PBI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PBI's net profit margin of 5.78% compares favorably to the industry average.
  • The debt-to-equity ratio is very high at 55.10 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, PBI's quick ratio is somewhat strong at 1.04, demonstrating the ability to handle short-term liquidity needs.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Commercial Services & Supplies industry. The net income has significantly decreased by 57.5% when compared to the same quarter one year ago, falling from $158.67 million to $67.51 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.

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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