3 Hold-Rated Dividend Stocks: FTR, IVR, ECA

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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 3 stocks with substantial yields, that ultimately, we have rated "Hold."

Frontier Communications Corp Class B

Dividend Yield: 9.30%

Frontier Communications Corp Class B (NASDAQ: FTR) shares currently have a dividend yield of 9.30%.

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 39.18.

The average volume for Frontier Communications Corp Class B has been 9,247,000 shares per day over the past 30 days. Frontier Communications Corp Class B has a market cap of $4.3 billion and is part of the telecommunications industry. Shares are up 0.7% 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 expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and weak operating cash flow.

Highlights from the ratings report include:
  • FRONTIER COMMUNICATIONS 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. 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).
  • FTR, with its decline in revenue, slightly underperformed the industry average of 2.7%. Since the same quarter one year prior, revenues slightly dropped by 5.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Although FTR's debt-to-equity ratio of 2.07 is very high, it is currently less than that of the industry average. Along with the unfavorable debt-to-equity ratio, FTR maintains a poor quick ratio of 0.91, which illustrates the inability to avoid short-term cash problems.
  • 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 313.8% when compared to the same quarter one year ago, falling from $17.99 million to -$38.46 million.

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

Invesco Mortgage Capital

Dividend Yield: 12.30%

Invesco Mortgage Capital (NYSE: IVR) shares currently have a dividend yield of 12.30%.

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 5.25.

The average volume for Invesco Mortgage Capital has been 1,755,200 shares per day over the past 30 days. Invesco Mortgage Capital has a market cap of $2.2 billion and is part of the real estate industry. Shares are down 17.5% year to date as of the close of trading on Friday.

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

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.8%. Since the same quarter one year prior, revenues rose by 26.2%. 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, INVESCO MORTGAGE CAPITAL INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for INVESCO MORTGAGE CAPITAL INC is currently very high, coming in at 91.84%. Regardless of IVR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, IVR's net profit margin of 79.59% significantly outperformed against the industry.
  • INVESCO MORTGAGE CAPITAL INC has improved earnings per share by 39.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings 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 19.2% in earnings ($2.34 versus $2.89).
  • IVR has underperformed the S&P 500 Index, declining 22.76% from its price level of one year ago. 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.

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

Encana

Dividend Yield: 4.50%

Encana (NYSE: ECA) shares currently have a dividend yield of 4.50%.

Encana Corporation and its subsidiaries engage in the exploration for, development, production, and marketing of natural gas, oil, and natural gas liquids in Canada and the United States.

The average volume for Encana has been 4,198,100 shares per day over the past 30 days. Encana has a market cap of $13.0 billion and is part of the energy industry. Shares are down 10.8% year to date as of the close of trading on Friday.

TheStreet Ratings rates Encana as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and weak operating cash flow.

Highlights from the ratings report include:
  • ECA's very impressive revenue growth greatly exceeded the industry average of 6.4%. Since the same quarter one year prior, revenues leaped by 171.4%. 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 149.3% when compared to the same quarter one year prior, rising from -$1,482.00 million to $730.00 million.
  • ENCANA CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, ENCANA CORP swung to a loss, reporting -$3.79 versus $0.15 in the prior year.
  • ECA has underperformed the S&P 500 Index, declining 21.83% from its price level of one year ago. 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.
  • The debt-to-equity ratio of 1.45 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, ECA's quick ratio is somewhat strong at 1.41, demonstrating the ability to handle short-term liquidity needs.

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

Other helpful dividend tools from TheStreet:
null

If you liked this article you might like

3 Names That Could Jump 25% if Big 'What Ifs' Are Answered

3 Names That Could Jump 25% if Big 'What Ifs' Are Answered

Johnson & Johnson, STMicroelectronics: 'Mad Money' Lightning Round

Johnson & Johnson, STMicroelectronics: 'Mad Money' Lightning Round

It's a Flash Sale!: Cramer's 'Mad Money' Recap (Wednesday 1/31/18)

It's a Flash Sale!: Cramer's 'Mad Money' Recap (Wednesday 1/31/18)

You Can't Have it Both Ways: Cramer's 'Mad Money' Recap (Wed 1/10/18)

You Can't Have it Both Ways: Cramer's 'Mad Money' Recap (Wed 1/10/18)

Toyota, Southwest Airlines, iRhythm Technologies: 'Mad Money' Lightning Round'

Toyota, Southwest Airlines, iRhythm Technologies: 'Mad Money' Lightning Round'