3 Hold-Rated Dividend Stocks: CNSL, LRE, WHF

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

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."

Consolidated Communications

Dividend Yield: 7.60%

Consolidated Communications (NASDAQ: CNSL) shares currently have a dividend yield of 7.60%.

Consolidated Communications Holdings, Inc., through its subsidiaries, provides various integrated communications services to residential and business clients. The company has a P/E ratio of 58.63.

The average volume for Consolidated Communications has been 304,500 shares per day over the past 30 days. Consolidated Communications has a market cap of $1.0 billion and is part of the telecommunications industry. Shares are down 26.3% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Consolidated Communications as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.7%. Since the same quarter one year prior, revenues rose by 25.7%. 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.
  • Net operating cash flow has increased to $54.42 million or 24.49% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 11.32%.
  • The gross profit margin for CONSOLIDATED COMM HLDGS INC is rather high; currently it is at 59.68%. 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 -5.75% significantly underperformed when compared to the industry average.
  • Although CNSL's debt-to-equity ratio of 4.24 is very high, it is currently less than that of the industry average. To add to this, CNSL has a quick ratio of 0.66, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • 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. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, CONSOLIDATED COMM HLDGS INC'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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