3 Hold-Rated Dividend Stocks: CTL, RIG, BTE

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 which could 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."

CenturyLink

Dividend Yield: 6.40%

CenturyLink (NYSE: CTL) shares currently have a dividend yield of 6.40%.

CenturyLink, Inc. operates as an integrated telecommunications company in the United States. The company operates through four segments: Consumer, Business, Wholesale, and Data Hosting.

The average volume for CenturyLink has been 5,842,900 shares per day over the past 30 days. CenturyLink has a market cap of $19.4 billion and is part of the telecommunications industry. Shares are up 6.6% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates CenturyLink as a hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, expanding profit margins and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • CENTURYLINK INC has improved earnings per share by 10.8% 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, CENTURYLINK INC swung to a loss, reporting -$0.43 versus $1.24 in the prior year. This year, the market expects an improvement in earnings ($2.56 versus -$0.43).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 1.1%. Since the same quarter one year prior, revenues slightly dropped by 0.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for CENTURYLINK INC is rather high; currently it is at 57.86%. Regardless of CTL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CTL's net profit margin of 5.26% is significantly lower than the industry average.
  • Net operating cash flow has decreased to $1,151.00 million or 16.53% 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.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, CENTURYLINK INC's return on equity significantly trails that of both the industry average and 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.

Transocean

Dividend Yield: 5.40%

Transocean (NYSE: RIG) shares currently have a dividend yield of 5.40%.

Transocean Ltd., together with its subsidiaries, provides offshore contract drilling services for oil and gas wells worldwide. The company provides deepwater and harsh environment drilling, oil and gas drilling management, and drilling engineering and drilling project management services. The company has a P/E ratio of 10.13.

The average volume for Transocean has been 5,511,700 shares per day over the past 30 days. Transocean has a market cap of $14.9 billion and is part of the energy industry. Shares are down 14.9% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Transocean as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.2%. Since the same quarter one year prior, revenues slightly increased by 0.3%. 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.
  • RIG's debt-to-equity ratio of 0.64 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that RIG's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.57 is high and demonstrates strong liquidity.
  • Net operating cash flow has decreased to $773.00 million or 16.25% 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.
  • 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 Energy Equipment & Services industry. The net income has significantly decreased by 48.9% when compared to the same quarter one year ago, falling from $456.00 million to $233.00 million.

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

Baytex Energy

Dividend Yield: 5.80%

Baytex Energy (NYSE: BTE) shares currently have a dividend yield of 5.80%.

Baytex Energy Corp., an oil and gas company, is engaged in the acquisition, development, and production of oil and natural gas in the Western Canadian Sedimentary Basin and the United States. The company offers heavy oil, light oil, and natural gas liquids. The company has a P/E ratio of 31.66.

The average volume for Baytex Energy has been 226,200 shares per day over the past 30 days. Baytex Energy has a market cap of $5.1 billion and is part of the energy industry. Shares are up 5.6% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Baytex Energy as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins 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, disappointing return on equity 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 7.8%. Since the same quarter one year prior, revenues rose by 10.2%. 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.
  • The gross profit margin for BAYTEX ENERGY CORP is rather high; currently it is at 58.55%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 11.57% is above that of the industry average.
  • In its most recent trading session, BTE 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.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, BAYTEX ENERGY CORP's return on equity is significantly below that of the industry average and is below 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.

Other helpful dividend tools from TheStreet:

null

More from Markets

Dow and Nasdaq Finish Lower as 10-Year Treasury Yield Hovers Near 3%

Dow and Nasdaq Finish Lower as 10-Year Treasury Yield Hovers Near 3%

Video: Stop Using Student Loan Money to Buy Bitcoin

Video: Stop Using Student Loan Money to Buy Bitcoin

Let the Najarian Brothers Crash-Proof Portfolio

Let the Najarian Brothers Crash-Proof Portfolio

Facebook Sends Facial Recognition Notification in Error

Facebook Sends Facial Recognition Notification in Error

3 Hot Reads From TheStreet's Top Premium Columnists

3 Hot Reads From TheStreet's Top Premium Columnists