5 Hold-Rated Dividend Stocks: RRD, POM, EXC, O, DLR

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

R.R. Donnelley & Sons Company

Dividend Yield: 6.00%

R.R. Donnelley & Sons Company (NASDAQ: RRD) shares currently have a dividend yield of 6.00%.

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 2,181,000 shares per day over the past 30 days. R.R. Donnelley & Sons Company has a market cap of $3.2 billion and is part of the diversified services industry. Shares are down 14.1% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates R.R. Donnelley & Sons Company as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth 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:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.4%. Since the same quarter one year prior, revenues slightly increased by 4.2%. 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 its closing price of one year ago, RRD's share price has jumped by 87.29%, exceeding the performance of the broader market during that same time frame. 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.
  • The gross profit margin for DONNELLEY (R R) & SONS CO is rather low; currently it is at 21.81%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.56% trails 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 Commercial Services & Supplies industry. The net income has significantly decreased by 79.4% when compared to the same quarter one year ago, falling from $71.40 million to $14.70 million.

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

Pepco Holdings

Dividend Yield: 5.50%

Pepco Holdings (NYSE: POM) shares currently have a dividend yield of 5.50%.

Pepco Holdings, Inc., through its subsidiaries, engages in the transmission, distribution, and supply of electricity. The company also distributes and supplies natural gas. The company has a P/E ratio of 30.38.

The average volume for Pepco Holdings has been 1,911,000 shares per day over the past 30 days. Pepco Holdings has a market cap of $4.9 billion and is part of the utilities industry. Shares are up 5% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Pepco Holdings as a hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, good cash flow from operations 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 generally higher debt management risk.

Highlights from the ratings report include:
  • PEPCO HOLDINGS INC has improved earnings per share by 15.8% 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, PEPCO HOLDINGS INC reported lower earnings of $0.98 versus $1.14 in the prior year. This year, the market expects an improvement in earnings ($1.12 versus $0.98).
  • Net operating cash flow has slightly increased to $302.00 million or 2.37% when compared to the same quarter last year. Despite an increase in cash flow, PEPCO HOLDINGS INC's cash flow growth rate is still lower than the industry average growth rate of 20.96%.
  • POM, with its decline in revenue, slightly underperformed the industry average of 0.1%. Since the same quarter one year prior, revenues slightly dropped by 3.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 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 Electric Utilities industry and the overall market on the basis of return on equity, PEPCO HOLDINGS INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • In its most recent trading session, POM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

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

Exelon

Dividend Yield: 4.20%

Exelon (NYSE: EXC) shares currently have a dividend yield of 4.20%.

Exelon Corporation, a utility services holding company, engages in the energy generation and distribution business in the United States. The company has a P/E ratio of 11.76.

The average volume for Exelon has been 7,373,900 shares per day over the past 30 days. Exelon has a market cap of $25.2 billion and is part of the utilities industry. Shares are up 7.6% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Exelon as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth 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 and poor profit margins.

Highlights from the ratings report include:
  • EXELON CORP has improved earnings per share by 31.8% 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, EXELON CORP increased its bottom line by earning $2.00 versus $1.40 in the prior year. This year, the market expects an improvement in earnings ($2.28 versus $2.00).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Electric Utilities industry average. The net income increased by 30.9% when compared to the same quarter one year prior, rising from $378.00 million to $495.00 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.88, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.77 is somewhat weak and could be cause for future problems.
  • The gross profit margin for EXELON CORP is rather low; currently it is at 23.20%. Regardless of EXC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 8.01% trails the industry average.
  • In its most recent trading session, EXC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

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

Realty Income Corporation

Dividend Yield: 5.30%

Realty Income Corporation (NYSE: O) shares currently have a dividend yield of 5.30%.

Realty Income Corporation is a publicly traded real estate investment trust. It invests in the real estate markets of the United States. The firm makes investments in commercial real estate. Realty Income Corporation was founded in 1969 and is based in Escondido, California. The company has a P/E ratio of 49.39.

The average volume for Realty Income Corporation has been 2,155,800 shares per day over the past 30 days. Realty Income Corporation has a market cap of $8.4 billion and is part of the real estate industry. Shares are up 9.9% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Realty Income Corporation as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • O's very impressive revenue growth greatly exceeded the industry average of 6.8%. Since the same quarter one year prior, revenues leaped by 70.1%. 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 Real Estate Investment Trusts (REITs) industry. The net income increased by 37.7% when compared to the same quarter one year prior, rising from $37.46 million to $51.57 million.
  • REALTY INCOME CORP has improved earnings per share by 5.9% 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, REALTY INCOME CORP reported lower earnings of $0.75 versus $0.96 in the prior year. This year, the market expects an improvement in earnings ($0.99 versus $0.75).
  • O has underperformed the S&P 500 Index, declining 7.39% 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 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, REALTY INCOME CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.

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

Digital Realty

Dividend Yield: 5.90%

Digital Realty (NYSE: DLR) shares currently have a dividend yield of 5.90%.

Digital Realty Trust, Inc., a real estate investment trust (REIT), through its controlling interest in Digital Realty Trust, L.P., engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate. The company has a P/E ratio of 24.59.

The average volume for Digital Realty has been 1,633,800 shares per day over the past 30 days. Digital Realty has a market cap of $6.8 billion and is part of the real estate industry. Shares are up 6.1% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Digital Realty as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • DLR's revenue growth has slightly outpaced the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 10.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • DIGITAL REALTY TRUST INC 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, DIGITAL REALTY TRUST INC increased its bottom line by earning $1.47 versus $1.31 in the prior year. This year, the market expects an improvement in earnings ($1.98 versus $1.47).
  • DLR has underperformed the S&P 500 Index, declining 22.41% 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 gross profit margin for DIGITAL REALTY TRUST INC is rather low; currently it is at 22.86%. It has decreased from the same quarter the previous year. Despite the weak results of the gross profit margin, the net profit margin of 39.47% has significantly outperformed against 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.

Other helpful dividend tools from TheStreet:
null

If you liked this article you might like

A Down Day, But Not As Bad As It Could Have Been: LIVE MARKETS BLOG

A Down Day, But Not As Bad As It Could Have Been: LIVE MARKETS BLOG

Freeport-McMoRan, Apple Hospitality REIT, Abbott Laboratories: 'Mad Money' Lightning Round

Freeport-McMoRan, Apple Hospitality REIT, Abbott Laboratories: 'Mad Money' Lightning Round

Reversal of Fortunes: Cramer's 'Mad Money' Recap (Thursday 7/27/17)

Reversal of Fortunes: Cramer's 'Mad Money' Recap (Thursday 7/27/17)

This Market Loves Tech: Cramer's 'Mad Money' Recap (Wednesday 3/29/17)

This Market Loves Tech: Cramer's 'Mad Money' Recap (Wednesday 3/29/17)

Ford Motor, Constellation Brands, Cypress Semiconductor: 'Mad Money' Lightning Round

Ford Motor, Constellation Brands, Cypress Semiconductor: 'Mad Money' Lightning Round