What To Hold: 3 Hold-Rated Dividend Stocks DDR, PM, MEMP

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."

DDR

Dividend Yield: 4.10%

DDR (NYSE: DDR) shares currently have a dividend yield of 4.10%.

DDR Corp. is an equity real estate investment trust. It invests in the real estate markets of the United States and Puerto Rico. The firm is in the business of acquiring, owning, developing, redeveloping, expanding, leasing and managing shopping centers.

The average volume for DDR has been 3,547,900 shares per day over the past 30 days. DDR has a market cap of $6.1 billion and is part of the real estate industry. Shares are down 9.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates DDR as a hold. Among the primary strengths of the company is its revenue growth. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity 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 8.5%. Since the same quarter one year prior, revenues slightly increased by 6.4%. 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.
  • DDR CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, DDR CORP turned its bottom line around by earning $0.02 versus -$0.05 in the prior year. For the next year, the market is expecting a contraction of 3200.0% in earnings (-$0.62 versus $0.02).
  • In its most recent trading session, DDR 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. 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.
  • 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, DDR CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $62.70 million or 31.76% 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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Philip Morris International

Dividend Yield: 4.90%

Philip Morris International (NYSE: PM) shares currently have a dividend yield of 4.90%.

Philip Morris International Inc., through its subsidiaries, manufactures and sells cigarettes, other tobacco products, and other nicotine-containing products. The company has a P/E ratio of 17.26.

The average volume for Philip Morris International has been 5,214,000 shares per day over the past 30 days. Philip Morris International has a market cap of $126.8 billion and is part of the tobacco industry. Shares are down 2.1% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Philip Morris International as a hold. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including weak operating cash flow, feeble growth in the company's earnings per share and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The gross profit margin for PHILIP MORRIS INTERNATIONAL is rather high; currently it is at 68.88%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.13% is above that of the industry average.
  • Despite the weak revenue results, PM has outperformed against the industry average of 23.2%. Since the same quarter one year prior, revenues slightly dropped by 4.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • PHILIP MORRIS INTERNATIONAL' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, PHILIP MORRIS INTERNATIONAL reported lower earnings of $4.76 versus $5.26 in the prior year. For the next year, the market is expecting a contraction of 7.0% in earnings ($4.43 versus $4.76).
  • Net operating cash flow has significantly decreased to -$375.00 million or 152.44% 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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Memorial Production Partners

Dividend Yield: 14.70%

Memorial Production Partners (NASDAQ: MEMP) shares currently have a dividend yield of 14.70%.

Memorial Production Partners LP, through its subsidiary, engages in the acquisition, development, exploitation, and production of oil and natural gas properties. The company has a P/E ratio of 46.78.

The average volume for Memorial Production Partners has been 790,500 shares per day over the past 30 days. Memorial Production Partners has a market cap of $1.3 billion and is part of the energy industry. Shares are up 3% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Memorial Production Partners as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has increased to $71.96 million or 49.85% when compared to the same quarter last year. In addition, MEMORIAL PRODUCTION PRTRS LP has also vastly surpassed the industry average cash flow growth rate of -53.19%.
  • Despite the weak revenue results, MEMP has outperformed against the industry average of 38.5%. Since the same quarter one year prior, revenues fell by 20.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 394.2% when compared to the same quarter one year ago, falling from -$32.95 million to -$162.82 million.
  • Currently the debt-to-equity ratio of 1.74 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.46, which clearly demonstrates the inability to cover short-term cash needs.

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