3 Hold-Rated Dividend Stocks: HR, PKY, OKE

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."

Healthcare Realty

Dividend Yield: 4.90%

Healthcare Realty (NYSE: HR) shares currently have a dividend yield of 4.90%.

Healthcare Realty Trust Incorporated is an independent real estate investment trust. The firm invests in real estate markets of the United States. The company has a P/E ratio of 75.97.

The average volume for Healthcare Realty has been 684,400 shares per day over the past 30 days. Healthcare Realty has a market cap of $2.4 billion and is part of the real estate industry. Shares are down 11.2% year-to-date as of the close of trading on Thursday.

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

Highlights from the ratings report include:
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 39.7% when compared to the same quarter one year prior, rising from $3.85 million to $5.38 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.4%. Since the same quarter one year prior, revenues slightly increased by 6.5%. 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.
  • HEALTHCARE REALTY TRUST INC's earnings per share declined by 37.5% 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, HEALTHCARE REALTY TRUST INC turned its bottom line around by earning $0.35 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings ($0.44 versus $0.35).
  • The gross profit margin for HEALTHCARE REALTY TRUST INC is rather low; currently it is at 24.21%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.57% significantly trails the industry average.
  • In its most recent trading session, HR 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. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

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Parkway Properties

Dividend Yield: 4.20%

Parkway Properties (NYSE: PKY) shares currently have a dividend yield of 4.20%.

Parkway Properties, Inc., a real estate investment trust (REIT), engages in the operation, acquisition, ownership, management, and leasing of office properties. It operates and invests principally in office properties in the southeastern and southwestern United States and Chicago. The company has a P/E ratio of 46.00.

The average volume for Parkway Properties has been 676,300 shares per day over the past 30 days. Parkway Properties has a market cap of $2.0 billion and is part of the real estate industry. Shares are down 3.5% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Parkway Properties as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and poor profit margins.

Highlights from the ratings report include:
  • PKY's revenue growth has slightly outpaced the industry average of 8.4%. Since the same quarter one year prior, revenues rose by 15.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • PARKWAY PROPERTIES 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, PARKWAY PROPERTIES INC turned its bottom line around by earning $0.29 versus -$0.60 in the prior year. For the next year, the market is expecting a contraction of 220.7% in earnings (-$0.35 versus $0.29).
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, PARKWAY PROPERTIES INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • 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 Real Estate Investment Trusts (REITs) industry average. The net income has significantly decreased by 32.9% when compared to the same quarter one year ago, falling from $10.85 million to $7.28 million.
  • PKY has underperformed the S&P 500 Index, declining 6.41% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

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ONEOK

Dividend Yield: 5.40%

ONEOK (NYSE: OKE) shares currently have a dividend yield of 5.40%.

ONEOK, Inc. engages in the gathering, processing, storage, and transportation of natural gas in the United States. It operates in Natural Gas Gathering and Processing, Natural Gas Liquids, and Natural Gas Pipelines segments. The company has a P/E ratio of 32.96.

The average volume for ONEOK has been 2,059,000 shares per day over the past 30 days. ONEOK has a market cap of $9.4 billion and is part of the utilities industry. Shares are down 9.4% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates ONEOK as a hold. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and weak operating cash flow.

Highlights from the ratings report include:
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, ONEOK INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • OKE, with its decline in revenue, slightly underperformed the industry average of 38.3%. Since the same quarter one year prior, revenues fell by 42.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • ONEOK INC's earnings per share declined by 34.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ONEOK INC increased its bottom line by earning $1.53 versus $1.33 in the prior year. For the next year, the market is expecting a contraction of 1.6% in earnings ($1.51 versus $1.53).
  • Net operating cash flow has significantly decreased to $39.27 million or 91.99% 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.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 29.27%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 34.09% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, OKE is still more expensive than most of the other companies in its industry.

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