What To Hold: 3 Hold-Rated Dividend Stocks GES, HTS, PDM

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."

Guess

Dividend Yield: 4.20%

Guess (NYSE: GES) shares currently have a dividend yield of 4.20%.

Guess , Inc. designs, markets, distributes, and licenses lifestyle collections of contemporary apparel and accessories for men, women, and children that reflect the American lifestyle and European fashion sensibilities. The company has a P/E ratio of 14.92.

The average volume for Guess has been 1,127,900 shares per day over the past 30 days. Guess has a market cap of $1.8 billion and is part of the retail industry. Shares are down 28.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Guess as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. 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:
  • GES's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, GES has a quick ratio of 1.94, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 36.31% is the gross profit margin for GUESS INC which we consider to be strong. Regardless of GES's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.77% trails the industry average.
  • 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. In comparison to the other companies in the Specialty Retail industry and the overall market, GUESS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has significantly decreased to $30.60 million or 56.55% 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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Hatteras Financial

Dividend Yield: 10.50%

Hatteras Financial (NYSE: HTS) shares currently have a dividend yield of 10.50%.

Hatteras Financial Corp. operates as an externally-managed mortgage real estate investment trust (REIT) in the United States. The company has a P/E ratio of 36.50.

The average volume for Hatteras Financial has been 860,300 shares per day over the past 30 days. Hatteras Financial has a market cap of $1.8 billion and is part of the real estate industry. Shares are up 16.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Hatteras Financial as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and compelling growth in net income. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • HTS's very impressive revenue growth greatly exceeded the industry average of 13.7%. Since the same quarter one year prior, revenues leaped by 164.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
  • HATTERAS FINANCIAL 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, HATTERAS FINANCIAL CORP swung to a loss, reporting -$1.60 versus $3.65 in the prior year. This year, the market expects an improvement in earnings ($1.09 versus -$1.60).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength 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, HATTERAS FINANCIAL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.

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Piedmont Office Realty

Dividend Yield: 4.30%

Piedmont Office Realty (NYSE: PDM) shares currently have a dividend yield of 4.30%.

Piedmont Office Realty Trust, Inc. engages in the acquisition and ownership of commercial real estate properties in the United States. Its property portfolio primarily consists of office and industrial buildings, warehouses, and manufacturing facilities. The company has a P/E ratio of 67.03.

The average volume for Piedmont Office Realty has been 779,600 shares per day over the past 30 days. Piedmont Office Realty has a market cap of $3.0 billion and is part of the real estate industry. Shares are up 17% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Piedmont Office Realty as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels 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:
  • PDM's revenue growth trails the industry average of 13.7%. Since the same quarter one year prior, revenues slightly increased by 1.7%. 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 where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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 PIEDMONT OFFICE REALTY TRUST is rather low; currently it is at 19.15%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 6.30% significantly trails the industry average.
  • Net operating cash flow has decreased to $48.62 million or 39.21% 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.

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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