3 Hold-Rated Dividend Stocks: SRC, COP, GRMN

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."

Spirit Realty Capital

Dividend Yield: 6.50%

Spirit Realty Capital (NYSE: SRC) shares currently have a dividend yield of 6.50%.

Spirit Realty Capital, Inc is a publicly traded real estate investment trust.

The average volume for Spirit Realty Capital has been 5,745,900 shares per day over the past 30 days. Spirit Realty Capital has a market cap of $4.6 billion and is part of the real estate industry. Shares are down 12.6% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Spirit Realty Capital as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • SRC's revenue growth has slightly outpaced the industry average of 8.5%. Since the same quarter one year prior, revenues rose by 12.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • SPIRIT REALTY CAPITAL 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, SPIRIT REALTY CAPITAL INC continued to lose money by earning -$0.10 versus -$0.11 in the prior year. This year, the market expects an improvement in earnings ($0.21 versus -$0.10).
  • 45.15% is the gross profit margin for SPIRIT REALTY CAPITAL INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, SRC's net profit margin of 15.60% significantly trails the industry average.
  • SRC has underperformed the S&P 500 Index, declining 7.76% from its price level of one year ago. 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.
  • 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, SPIRIT REALTY CAPITAL INC's return on equity significantly trails that of both the industry average and the S&P 500.

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ConocoPhillips

Dividend Yield: 4.60%

ConocoPhillips (NYSE: COP) shares currently have a dividend yield of 4.60%.

ConocoPhillips explores for, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids worldwide. The company has a P/E ratio of 20.27.

The average volume for ConocoPhillips has been 6,604,800 shares per day over the past 30 days. ConocoPhillips has a market cap of $78.2 billion and is part of the energy industry. Shares are down 8.7% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates ConocoPhillips as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. 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:
  • The current debt-to-equity ratio, 0.46, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.84 is somewhat weak and could be cause for future problems.
  • COP, with its decline in revenue, underperformed when compared the industry average of 38.5%. Since the same quarter one year prior, revenues fell by 49.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for CONOCOPHILLIPS is currently lower than what is desirable, coming in at 33.14%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.52% trails that of the industry average.
  • Net operating cash flow has significantly decreased to $1,870.00 million or 70.48% 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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Garmin

Dividend Yield: 4.50%

Garmin (NASDAQ: GRMN) shares currently have a dividend yield of 4.50%.

Garmin Ltd., together with its subsidiaries, designs, develops, manufactures, and markets hand-held, wrist-based, and portable and fixed-mount global positioning system (GPS) enabled products; and other navigation, communication, and information products worldwide. The company has a P/E ratio of 28.07.

The average volume for Garmin has been 1,297,800 shares per day over the past 30 days. Garmin has a market cap of $8.7 billion and is part of the electronics industry. Shares are down 13.5% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Garmin as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.7%. Since the same quarter one year prior, revenues slightly increased by 0.4%. 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.
  • GRMN has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, GRMN has a quick ratio of 2.27, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 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. When compared to other companies in the Household Durables industry and the overall market, GARMIN LTD's return on equity is below that of both the industry average and the S&P 500.
  • The share price of GARMIN LTD has not done very well: it is down 21.99% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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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