3 Hold-Rated Dividend Stocks: VLY, IEP, SPLS

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."

Valley National Bancorp

Dividend Yield: 4.50%

Valley National Bancorp (NYSE: VLY) shares currently have a dividend yield of 4.50%.

Valley National Bancorp operates as the bank holding company for the Valley National Bank that provides commercial, retail, and trust and investment services. The company has a P/E ratio of 15.03.

The average volume for Valley National Bancorp has been 1,906,300 shares per day over the past 30 days. Valley National Bancorp has a market cap of $2.0 billion and is part of the banking industry. Shares are down 2.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Valley National Bancorp as a hold. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • The gross profit margin for VALLEY NATIONAL BANCORP is currently very high, coming in at 79.91%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.40% is above that of the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 11.9%. Since the same quarter one year prior, revenues slightly dropped by 8.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing 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 Commercial Banks industry and the overall market on the basis of return on equity, VALLEY NATIONAL BANCORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • VALLEY NATIONAL BANCORP's earnings per share declined by 11.8% in the most recent quarter compared to 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, VALLEY NATIONAL BANCORP reported lower earnings of $0.67 versus $0.74 in the prior year. For the next year, the market is expecting a contraction of 12.7% in earnings ($0.59 versus $0.67).
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Commercial Banks industry average. The net income has decreased by 13.0% when compared to the same quarter one year ago, dropping from $33.92 million to $29.52 million.

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Icahn

Dividend Yield: 5.60%

Icahn (NASDAQ: IEP) shares currently have a dividend yield of 5.60%.

Icahn Enterprises L.P. is engaged in the investment, automotive, energy, metals, railcar, gaming, food packaging, real estate, and home fashion businesses in the United States and Internationally. The company has a P/E ratio of 9.53.

The average volume for Icahn has been 106,900 shares per day over the past 30 days. Icahn has a market cap of $12.9 billion and is part of the conglomerates industry. Shares are down 2.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Icahn as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 8.9%. Since the same quarter one year prior, revenues rose by 39.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 745.83% and other important driving factors, this stock has surged by 39.10% over the past year, outperforming the rise in the S&P 500 Index during the same period. Although IEP had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • 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 Auto Components industry and the overall market on the basis of return on equity, ICAHN ENTERPRISES LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Currently the debt-to-equity ratio of 1.85 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated.

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

Staples

Dividend Yield: 4.20%

Staples (NASDAQ: SPLS) shares currently have a dividend yield of 4.20%.

Staples, Inc., together with its subsidiaries, operates office products superstores. It operates in three segments: North American Stores & Online, North American Commercial, and International Operations. The company has a P/E ratio of 11.97.

The average volume for Staples has been 9,714,000 shares per day over the past 30 days. Staples has a market cap of $7.4 billion and is part of the specialty retail industry. Shares are down 27.4% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Staples as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations 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 a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has slightly increased to $359.85 million or 3.53% when compared to the same quarter last year. In addition, STAPLES INC has also modestly surpassed the industry average cash flow growth rate of -5.57%.
  • SPLS's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.74 is somewhat weak and could be cause for future 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 Specialty Retail industry. The net income has significantly decreased by 43.4% when compared to the same quarter one year ago, falling from $169.93 million to $96.21 million.
  • The gross profit margin for STAPLES INC is currently lower than what is desirable, coming in at 26.94%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.70% trails that of the industry average.

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