3 Hold-Rated Dividend Stocks: DRI, VLY, CY

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."

Darden Restaurants

Dividend Yield: 4.30%

Darden Restaurants (NYSE: DRI) shares currently have a dividend yield of 4.30%.

Darden Restaurants, Inc. owns and operates full service restaurants in the United States and Canada. It operates restaurants under the Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, The Capital Grille, Eddie V's, and Yard House brand names. The company has a P/E ratio of 56.23.

The average volume for Darden Restaurants has been 1,767,500 shares per day over the past 30 days. Darden Restaurants has a market cap of $6.8 billion and is part of the leisure industry. Shares are down 5.7% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Darden Restaurants 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 stock price during the past year. 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:
  • DRI's revenue growth has slightly outpaced the industry average of 5.5%. 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.76, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.32 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • In its most recent trading session, DRI 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. 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.
  • The gross profit margin for DARDEN RESTAURANTS INC is rather low; currently it is at 19.63%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.20% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to $44.60 million or 79.44% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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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 15.12.

The average volume for Valley National Bancorp has been 1,685,800 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 4.2% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Valley National Bancorp as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins and increase in stock price during the past year. However, as a counter to these strengths, 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 12.8%. 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.
  • 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 9.7% in earnings ($0.61 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.

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

Cypress Semiconductor

Dividend Yield: 4.30%

Cypress Semiconductor (NASDAQ: CY) shares currently have a dividend yield of 4.30%.

Cypress Semiconductor Corporation provides mixed-signal programmable solutions, specialized semiconductor memories, and integrated semiconductor solutions.

The average volume for Cypress Semiconductor has been 2,108,800 shares per day over the past 30 days. Cypress Semiconductor has a market cap of $1.6 billion and is part of the electronics industry. Shares are down 5% year-to-date as of the close of trading on Thursday.

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

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 190.8% when compared to the same quarter one year prior, rising from $3.28 million to $9.53 million.
  • Net operating cash flow has increased to $44.31 million or 45.96% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 7.59%.
  • CYPRESS SEMICONDUCTOR CORP reported significant earnings per share improvement 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, CYPRESS SEMICONDUCTOR CORP reported poor results of -$0.33 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings ($0.54 versus -$0.33).
  • CY has underperformed the S&P 500 Index, declining 6.87% 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 1.38 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, CY has a quick ratio of 0.67, 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.

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