What To Hold: 3 Hold-Rated Dividend Stocks PBT, CNSL, BGCP

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."

Permian Basin Royalty

Dividend Yield: 9.80%

Permian Basin Royalty (NYSE: PBT) shares currently have a dividend yield of 9.80%.

Permian Basin Royalty Trust owns overriding royalty interests in various oil and gas properties in the United States. The company has a P/E ratio of 15.11.

The average volume for Permian Basin Royalty has been 112,700 shares per day over the past 30 days. Permian Basin Royalty has a market cap of $616.6 million and is part of the energy industry. Shares are up 3.4% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Permian Basin Royalty as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and increase in net income. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good.

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 15.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • PBT 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.25, which illustrates the ability to avoid short-term cash problems.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.
  • PERMIAN BASIN ROYALTY TRUST has improved earnings per share by 15.0% 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, PERMIAN BASIN ROYALTY TRUST reported lower earnings of $0.87 versus $1.16 in the prior year.
  • 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, PERMIAN BASIN ROYALTY TRUST's return on equity significantly exceeds 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.

Consolidated Communications

Dividend Yield: 7.80%

Consolidated Communications (NASDAQ: CNSL) shares currently have a dividend yield of 7.80%.

Consolidated Communications Holdings, Inc., together with its subsidiaries, provides a range of communications services to residential and business clients in Illinois, Texas, Pennsylvania, California, Kansas, and Missouri. The company has a P/E ratio of 27.67.

The average volume for Consolidated Communications has been 226,000 shares per day over the past 30 days. Consolidated Communications has a market cap of $794.7 million and is part of the telecommunications industry. Shares are up 3% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Consolidated Communications as a hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and weak operating cash flow.

Highlights from the ratings report include:
  • CONSOLIDATED COMM HLDGS INC has improved earnings per share by 14.3% 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, CONSOLIDATED COMM HLDGS INC increased its bottom line by earning $0.74 versus $0.15 in the prior year. This year, the market expects an improvement in earnings ($0.96 versus $0.74).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, CONSOLIDATED COMM HLDGS INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for CONSOLIDATED COMM HLDGS INC is rather high; currently it is at 62.37%. Regardless of CNSL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CNSL's net profit margin of 2.12% is significantly lower than the industry average.
  • Net operating cash flow has decreased to $43.72 million or 14.81% 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 debt-to-equity ratio is very high at 8.27 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, CNSL has a quick ratio of 0.57, this demonstrates the lack of ability of the company to cover 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.

BGC Partners

Dividend Yield: 7.20%

BGC Partners (NASDAQ: BGCP) shares currently have a dividend yield of 7.20%.

BGC Partners, Inc. operates as a brokerage company, primarily servicing the wholesale financial and commercial real estate markets. It operates through two segments, Financial Services and Real Estate Services. The company has a P/E ratio of 19.28.

The average volume for BGC Partners has been 1,139,700 shares per day over the past 30 days. BGC Partners has a market cap of $1.2 billion and is part of the financial services industry. Shares are up 9.8% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates BGC Partners as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and poor profit margins.

Highlights from the ratings report include:
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market, BGC PARTNERS INC's return on equity exceeds that of both the industry average and the S&P 500.
  • 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.
  • Net operating cash flow has decreased to $63.81 million or 15.53% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much 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 Capital Markets industry. The net income has significantly decreased by 70.8% when compared to the same quarter one year ago, falling from $14.17 million to $4.13 million.

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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