5 Hold-Rated Dividend Stocks: GRMN, FTR, TWO, OZM, BBEP

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."

Garmin

Dividend Yield: 4.90%

Garmin (NASDAQ: GRMN) shares currently have a dividend yield of 4.90%.

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 13.14.

The average volume for Garmin has been 1,278,000 shares per day over the past 30 days. Garmin has a market cap of $7.1 billion and is part of the electronics industry. Shares are down 10.7% year to date as of the close of trading on Friday.

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.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 11.1%. 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 -115.57%.
  • 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: 9.10%

Frontier Communications Corp Class B (NASDAQ: FTR) shares currently have a dividend yield of 9.10%.

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 29.33.

The average volume for Frontier Communications Corp Class B has been 8,982,600 shares per day over the past 30 days. Frontier Communications Corp Class B has a market cap of $4.4 billion and is part of the telecommunications industry. Shares are up 2.8% year to date as of the close of trading on Friday.

TheStreet Ratings rates Frontier Communications Corp Class B 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 reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and generally higher debt management risk.

Highlights from the ratings report include:
  • Powered by its strong earnings growth of 66.66% and other important driving factors, this stock has surged by 34.96% over the past year, outperforming the rise in the S&P 500 Index during the same period. Although FTR had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • 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 79.8% when compared to the same quarter one year prior, rising from $26.77 million to $48.14 million.
  • FRONTIER COMMUNICATIONS CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, FRONTIER COMMUNICATIONS CORP's EPS of $0.14 remained unchanged from the prior years' EPS of $0.14. This year, the market expects an improvement in earnings ($0.23 versus $0.14).
  • The debt-to-equity ratio is very high at 2.07 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, FTR has managed to keep a strong quick ratio of 1.51, which demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has declined marginally to $359.29 million or 6.07% 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.

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Two Harbors Investment

Dividend Yield: 10.80%

Two Harbors Investment (NYSE: TWO) shares currently have a dividend yield of 10.80%.

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 8.65.

The average volume for Two Harbors Investment has been 7,538,100 shares per day over the past 30 days. Two Harbors Investment has a market cap of $4.3 billion and is part of the real estate industry. Shares are up 7.6% 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 find that the stock has experienced relatively poor performance when compared with the S&P 500 during the past year.

Highlights from the ratings report include:
  • TWO's very impressive revenue growth greatly exceeded the industry average of 12.0%. Since the same quarter one year prior, revenues leaped by 101.3%. 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, TWO HARBORS INVESTMENT CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of 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.
  • 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 ($1.25 versus $1.11).

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Och-Ziff Capital Management Group

Dividend Yield: 9.70%

Och-Ziff Capital Management Group (NYSE: OZM) shares currently have a dividend yield of 9.70%.

Och-Ziff Capital Management Group LLC is a publicly owned investment manager. The firm provides investment advisory services for its clients. It invests in equity markets across the world. The firm makes its investments in alternative markets across the world.

The average volume for Och-Ziff Capital Management Group has been 1,286,900 shares per day over the past 30 days. Och-Ziff Capital Management Group has a market cap of $1.7 billion and is part of the financial services industry. Shares are up 21.9% year to date as of the close of trading on Friday.

TheStreet Ratings rates Och-Ziff Capital Management Group as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and impressive record of earnings per share 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:
  • OZM's very impressive revenue growth greatly exceeded the industry average of 5.0%. Since the same quarter one year prior, revenues leaped by 91.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 119.54% and other important driving factors, this stock has surged by 47.19% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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.
  • Net operating cash flow has significantly increased by 1922.49% to $581.25 million when compared to the same quarter last year. In addition, OCH-ZIFF CAPITAL MGMT LP has also vastly surpassed the industry average cash flow growth rate of -120.45%.
  • The gross profit margin for OCH-ZIFF CAPITAL MGMT LP is rather high; currently it is at 66.40%. 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 9.64% 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.

BreitBurn Energy Partners

Dividend Yield: 10.00%

BreitBurn Energy Partners (NASDAQ: BBEP) shares currently have a dividend yield of 10.00%.

BreitBurn Energy Partners L.P. engages in the acquisition, exploitation, and development of oil and gas properties in the United States.

The average volume for BreitBurn Energy Partners has been 631,400 shares per day over the past 30 days. BreitBurn Energy Partners has a market cap of $1.9 billion and is part of the energy industry. Shares are up 2.7% year to date as of the close of trading on Friday.

TheStreet Ratings rates BreitBurn Energy Partners 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 disappointing return on equity, weak operating cash flow and generally higher debt management risk.

Highlights from the ratings report include:
  • BBEP's very impressive revenue growth greatly exceeded the industry average of 8.8%. Since the same quarter one year prior, revenues leaped by 63.9%. Growth in the company's revenue appears to have helped boost 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 27.4% when compared to the same quarter one year prior, rising from -$49.97 million to -$36.30 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.
  • 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, BREITBURN ENERGY PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $58.85 million or 17.45% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, BREITBURN ENERGY PARTNERS LP has marginally lower results.

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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