5 Hold-Rated Dividend Stocks: NCT, RRD, DRE, RY, FTR

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."

Newcastle Investment Corporation

Dividend Yield: 12.50%

Newcastle Investment Corporation (NYSE: NCT) shares currently have a dividend yield of 12.50%.

Newcastle Investment Corp. operates as a real estate investment and finance company in the United States. The company has a P/E ratio of 2.27.

The average volume for Newcastle Investment Corporation has been 10,771,000 shares per day over the past 30 days. Newcastle Investment Corporation has a market cap of $1.4 billion and is part of the real estate industry. Shares are down 37.7% year to date as of the close of trading on Monday.

TheStreet Ratings rates Newcastle Investment Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable 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 a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.0%. Since the same quarter one year prior, revenues slightly increased by 9.3%. 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 NEWCASTLE INVESTMENT CORP is rather high; currently it is at 68.20%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, NCT's net profit margin of 41.20% significantly outperformed against the industry.
  • NEWCASTLE INVESTMENT 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. 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, NEWCASTLE INVESTMENT CORP reported lower earnings of $2.85 versus $3.49 in the prior year. For the next year, the market is expecting a contraction of 83.5% in earnings ($0.47 versus $2.85).
  • 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 48.3% when compared to the same quarter one year ago, falling from $73.47 million to $38.01 million.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

R.R. Donnelley & Sons Company

Dividend Yield: 7.90%

R.R. Donnelley & Sons Company (NASDAQ: RRD) shares currently have a dividend yield of 7.90%.

R.R. Donnelley & Sons Company provides integrated communication solutions to private and public sectors worldwide.

The average volume for R.R. Donnelley & Sons Company has been 1,889,600 shares per day over the past 30 days. R.R. Donnelley & Sons Company has a market cap of $2.4 billion and is part of the diversified services industry. Shares are up 46.4% year to date as of the close of trading on Monday.

TheStreet Ratings rates R.R. Donnelley & Sons Company as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • RRD's revenue growth has slightly outpaced the industry average of 9.1%. Since the same quarter one year prior, revenues slightly increased by 0.5%. 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.
  • 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.
  • DONNELLEY (R R) & SONS CO's earnings per share declined by 28.6% in the most recent quarter compared to 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, DONNELLEY (R R) & SONS CO reported poor results of -$3.61 versus -$0.73 in the prior year. This year, the market expects an improvement in earnings ($1.63 versus -$3.61).
  • The gross profit margin for DONNELLEY (R R) & SONS CO is rather low; currently it is at 22.00%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.06% trails that of the industry average.
  • Net operating cash flow has significantly decreased to -$95.80 million or 84.23% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

Duke Realty

Dividend Yield: 4.40%

Duke Realty (NYSE: DRE) shares currently have a dividend yield of 4.40%.

Duke Realty Corporation operates as a real estate investment trust (REIT) in the United States. It offers leasing, property and asset management, development, construction, build-to-suit, and other tenant-related services.

The average volume for Duke Realty has been 2,693,800 shares per day over the past 30 days. Duke Realty has a market cap of $5.0 billion and is part of the real estate industry. Shares are up 13.4% year to date as of the close of trading on Monday.

TheStreet Ratings rates Duke Realty 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 find that the company's profit margins have been poor overall.

Highlights from the ratings report include:
  • DRE's revenue growth has slightly outpaced the industry average of 12.0%. Since the same quarter one year prior, revenues rose by 19.0%. 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 Real Estate Investment Trusts (REITs) industry. The net income increased by 349.2% when compared to the same quarter one year prior, rising from -$17.47 million to $43.53 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.
  • 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, DUKE REALTY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for DUKE REALTY CORP is currently lower than what is desirable, coming in at 30.10%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, DRE's net profit margin of 13.67% is significantly lower than the industry average.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

Royal Bank Of Canada

Dividend Yield: 4.20%

Royal Bank Of Canada (NYSE: RY) shares currently have a dividend yield of 4.20%.

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 11.12.

The average volume for Royal Bank Of Canada has been 631,200 shares per day over the past 30 days. Royal Bank Of Canada has a market cap of $85.1 billion and is part of the banking industry. Shares are down 1.5% year to date as of the close of trading on Monday.

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 increase in stock price during the past year. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.1%. Since the same quarter one year prior, revenues slightly increased by 7.7%. 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 gross profit margin for ROYAL BANK OF CANADA is currently very high, coming in at 75.60%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 19.75% trails the industry average.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Commercial Banks industry average, but is greater than that of the S&P 500. The net income increased by 26.8% when compared to the same quarter one year prior, rising from $1,508.00 million to $1,912.00 million.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

Frontier Communications Corp Class B

Dividend Yield: 9.50%

Frontier Communications Corp Class B (NASDAQ: FTR) shares currently have a dividend yield of 9.50%.

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 28.13.

The average volume for Frontier Communications Corp Class B has been 8,277,400 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 4.7% year to date as of the close of trading on Monday.

TheStreet Ratings rates Frontier Communications Corp Class B 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 increase in stock price during the past year. 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:
  • 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.
  • 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. 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.
  • 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.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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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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