What To Hold: 3 Hold-Rated Dividend Stocks EPD, PKY, RDS.A

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."

Enterprise Products Partners

Dividend Yield: 5.30%

Enterprise Products Partners (NYSE: EPD) shares currently have a dividend yield of 5.30%.

Enterprise Products Partners L.P. provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products in the United States and internationally. The company has a P/E ratio of 21.91.

The average volume for Enterprise Products Partners has been 4,850,100 shares per day over the past 30 days. Enterprise Products Partners has a market cap of $57.5 billion and is part of the energy industry. Shares are down 22.8% year-to-date as of the close of trading on Tuesday.

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

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 102.56% to $947.60 million when compared to the same quarter last year. In addition, ENTERPRISE PRODS PRTNRS -LP has also vastly surpassed the industry average cash flow growth rate of -19.65%.
  • EPD, with its decline in revenue, slightly underperformed the industry average of 34.6%. Since the same quarter one year prior, revenues fell by 43.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The debt-to-equity ratio of 1.11 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, EPD has a quick ratio of 0.61, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ENTERPRISE PRODS PRTNRS -LP's return on equity is below that of both the industry average and the S&P 500.

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Parkway Properties

Dividend Yield: 4.70%

Parkway Properties (NYSE: PKY) shares currently have a dividend yield of 4.70%.

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 26.21.

The average volume for Parkway Properties has been 648,400 shares per day over the past 30 days. Parkway Properties has a market cap of $1.8 billion and is part of the real estate industry. Shares are down 12.3% year-to-date as of the close of trading on Tuesday.

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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, 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 a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • PKY's revenue growth has slightly outpaced the industry average of 9.8%. Since the same quarter one year prior, revenues rose by 15.7%. Growth in the company's revenue appears to have helped boost 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 24.1% in earnings ($0.22 versus $0.29).
  • PKY has underperformed the S&P 500 Index, declining 16.25% 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 gross profit margin for PARKWAY PROPERTIES INC is rather low; currently it is at 15.78%. Regardless of PKY's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, PKY's net profit margin of 11.07% is significantly lower than the industry average.

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Royal Dutch Shell

Dividend Yield: 7.30%

Royal Dutch Shell (NYSE: RDS.A) shares currently have a dividend yield of 7.30%.

Royal Dutch Shell plc operates as an independent oil and gas company worldwide. It operates through Upstream and Downstream segments. The company explores for and extracts crude oil, natural gas, and natural gas liquids. The company has a P/E ratio of 21.89.

The average volume for Royal Dutch Shell has been 4,453,100 shares per day over the past 30 days. Royal Dutch Shell has a market cap of $165.1 billion and is part of the energy industry. Shares are down 20.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Royal Dutch Shell as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. 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:
  • RDS.A's debt-to-equity ratio is very low at 0.30 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • RDS.A, with its decline in revenue, slightly underperformed the industry average of 34.6%. Since the same quarter one year prior, revenues fell by 34.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Net operating cash flow has decreased to $6,050.00 million or 29.98% 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.
  • 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ROYAL DUTCH SHELL 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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