What To Hold: 3 Hold-Rated Dividend Stocks CXP, ESV, POT

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."

Columbia Property

Dividend Yield: 4.70%

Columbia Property (NYSE: CXP) shares currently have a dividend yield of 4.70%.

Columbia Property Trust, Inc is an equity real estate investment trust. The firm invests in the real estate markets of the United States. It focuses on investing in and managing high-quality commercial office properties. The firm was formerly known as Wells Real Estate Investment Trust II Inc. The company has a P/E ratio of 64.45.

The average volume for Columbia Property has been 596,100 shares per day over the past 30 days. Columbia Property has a market cap of $3.2 billion and is part of the real estate industry. Shares are up 2.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Columbia Property as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • COLUMBIA PROPERTY TRUST INC reported significant earnings per share improvement 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, COLUMBIA PROPERTY TRUST INC increased its bottom line by earning $0.21 versus $0.05 in the prior year. This year, the market expects an improvement in earnings ($0.38 versus $0.21).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 420.6% when compared to the same quarter one year prior, rising from $4.80 million to $24.99 million.
  • 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. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • The gross profit margin for COLUMBIA PROPERTY TRUST INC is rather low; currently it is at 19.19%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 18.00% trails that of the industry average.
  • Net operating cash flow has declined marginally to $58.14 million or 6.28% 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.

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Ensco

Dividend Yield: 7.50%

Ensco (NYSE: ESV) shares currently have a dividend yield of 7.50%.

Ensco plc provides offshore contract drilling services to the oil and gas industry worldwide. The company operates through three segments: Floaters, Jackups, and Other. The company has a P/E ratio of 18.05.

The average volume for Ensco has been 4,852,800 shares per day over the past 30 days. Ensco has a market cap of $9.3 billion and is part of the energy industry. Shares are down 30.3% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Ensco as a hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth and expanding profit margins. 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:
  • ENSCO PLC has improved earnings per share by 16.3% 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ENSCO PLC increased its bottom line by earning $6.04 versus $5.24 in the prior year. This year, the market expects an improvement in earnings ($6.22 versus $6.04).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 16.0%. Since the same quarter one year prior, revenues slightly increased by 8.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Despite currently having a low debt-to-equity ratio of 0.50, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that ESV's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.03 is high and demonstrates strong liquidity.
  • Net operating cash flow has declined marginally to $601.90 million or 7.14% 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. In comparison to the other companies in the Energy Equipment & Services industry and the overall market, ENSCO PLC's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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Potash Corp of Saskatchewan

Dividend Yield: 4.10%

Potash Corp of Saskatchewan (NYSE: POT) shares currently have a dividend yield of 4.10%.

Potash Corporation of Saskatchewan Inc., together with its subsidiaries, produces and sells fertilizers and related industrial and feed products worldwide. It mines and produces potash, which is primarily used as fertilizer. The company has a P/E ratio of 21.50.

The average volume for Potash Corp of Saskatchewan has been 5,029,800 shares per day over the past 30 days. Potash Corp of Saskatchewan has a market cap of $28.5 billion and is part of the chemicals industry. Shares are up 4.7% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Potash Corp of Saskatchewan as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, 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 weak operating cash flow.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.8%. Since the same quarter one year prior, revenues slightly increased by 8.0%. 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.
  • 42.54% is the gross profit margin for POTASH CORP SASK INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.31% significantly outperformed against the industry average.
  • The current debt-to-equity ratio, 0.48, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.49 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • 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 greatly underperformed compared to the Chemicals industry average. The net income has decreased by 10.9% when compared to the same quarter one year ago, dropping from $356.00 million to $317.00 million.
  • Net operating cash flow has declined marginally to $574.00 million or 6.81% 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.

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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