What To Hold: 3 Hold-Rated Dividend Stocks RYN, MDU, OKE

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."

Rayonier

Dividend Yield: 4.80%

Rayonier (NYSE: RYN) shares currently have a dividend yield of 4.80%.

Rayonier Inc. operates as an investment arm of Rayonier TRS Operating Company. Rayonier, Inc. engages in the sale and development of real estate and timberland management, as well as in the production and sale of cellulose fibers in the United States, New Zealand, and Australia. The company has a P/E ratio of 60.03.

The average volume for Rayonier has been 689,900 shares per day over the past 30 days. Rayonier has a market cap of $2.6 billion and is part of the materials & construction industry. Shares are down 7.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Rayonier as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins 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, feeble growth in the company's earnings per share and deteriorating net income.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.1%. Since the same quarter one year prior, revenues slightly increased by 1.2%. 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.
  • 44.56% is the gross profit margin for RAYONIER 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, RYN's net profit margin of 12.96% significantly trails the industry average.
  • Net operating cash flow has slightly increased to $57.52 million or 5.86% when compared to the same quarter last year. Despite an increase in cash flow, RAYONIER INC's average is still marginally south of the industry average growth rate of 9.44%.
  • RAYONIER INC's earnings per share declined by 36.0% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, RAYONIER INC reported lower earnings of $0.43 versus $0.80 in the prior year. For the next year, the market is expecting a contraction of 11.6% in earnings ($0.38 versus $0.43).
  • 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 39.9% when compared to the same quarter one year ago, falling from $32.70 million to $19.67 million.

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MDU Resources Group

Dividend Yield: 4.30%

MDU Resources Group (NYSE: MDU) shares currently have a dividend yield of 4.30%.

MDU Resources Group, Inc. operates as a diversified natural resource company in the United States. The company's Electric segment generates, transmits, and distributes electricity in Montana, North Dakota, South Dakota, and Wyoming. The company has a P/E ratio of 12.51.

The average volume for MDU Resources Group has been 1,343,400 shares per day over the past 30 days. MDU Resources Group has a market cap of $3.4 billion and is part of the materials & construction industry. Shares are down 4.5% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates MDU Resources Group as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, poor profit margins and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • MDU's revenue growth has slightly outpaced the industry average of 3.1%. Since the same quarter one year prior, revenues slightly increased by 5.5%. 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.
  • Net operating cash flow has slightly increased to $208.46 million or 8.13% when compared to the same quarter last year. Despite an increase in cash flow, MDU RESOURCES GROUP INC's cash flow growth rate is still lower than the industry average growth rate of 21.07%.
  • 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 Multi-Utilities industry. The net income has significantly decreased by 235.1% when compared to the same quarter one year ago, falling from $103.21 million to -$139.45 million.
  • The gross profit margin for MDU RESOURCES GROUP INC is currently extremely low, coming in at 13.09%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -10.89% is significantly below that of the industry average.

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ONEOK

Dividend Yield: 10.80%

ONEOK (NYSE: OKE) shares currently have a dividend yield of 10.80%.

ONEOK, Inc., through its general partner interests in ONEOK Partners, L.P., engages in the gathering, processing, storage, and transportation of natural gas in the United States. The company has a P/E ratio of 15.09.

The average volume for ONEOK has been 3,245,200 shares per day over the past 30 days. ONEOK has a market cap of $4.8 billion and is part of the utilities industry. Shares are down 6.5% year-to-date as of the close of trading on Friday.

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

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 27.4% when compared to the same quarter one year prior, rising from $64.46 million to $82.16 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. 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 36.9%. Since the same quarter one year prior, revenues fell by 39.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • OKE's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 49.12%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • The debt-to-equity ratio is very high at 21.04 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.32, which clearly demonstrates the inability to cover short-term cash needs.

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