What To Hold: 3 Hold-Rated Dividend Stocks GES, SFL, PKY

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."

Guess

Dividend Yield: 6.10%

Guess (NYSE: GES) shares currently have a dividend yield of 6.10%.

Guess , Inc. designs, markets, distributes, and licenses lifestyle collections of contemporary apparel and accessories for men, women, and children that reflect the American lifestyle and European fashion sensibilities. The company has a P/E ratio of 23.63.

The average volume for Guess has been 1,065,700 shares per day over the past 30 days. Guess has a market cap of $1.2 billion and is part of the retail industry. Shares are down 20.3% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Guess as a hold. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, 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:
  • GES's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, GES has a quick ratio of 1.89, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.8%. Since the same quarter one year prior, revenues slightly dropped by 5.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The share price of GUESS INC has not done very well: it is down 23.43% 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.
  • The gross profit margin for GUESS INC is currently lower than what is desirable, coming in at 32.15%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -5.90% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$30.84 million or 437.64% 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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Ship Finance International

Dividend Yield: 12.30%

Ship Finance International (NYSE: SFL) shares currently have a dividend yield of 12.30%.

Ship Finance International Limited owns and operates vessels and offshore related assets in Bermuda, Cyprus, Malta, Liberia, Norway, Singapore, the United Kingdom, and the Marshall Islands. It is also involved in the charter, purchase, and sale of assets. The company has a P/E ratio of 7.80.

The average volume for Ship Finance International has been 833,700 shares per day over the past 30 days. Ship Finance International has a market cap of $1.4 billion and is part of the transportation industry. Shares are down 11% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Ship Finance International as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 24.6%. Since the same quarter one year prior, revenues rose by 30.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SHIP FINANCE INTL LTD 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, SHIP FINANCE INTL LTD increased its bottom line by earning $1.87 versus $1.25 in the prior year. This year, the market expects an improvement in earnings ($2.16 versus $1.87).
  • SFL has underperformed the S&P 500 Index, declining 12.96% 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 debt-to-equity ratio of 1.39 is relatively high when compared with the industry average, suggesting a need for better debt level management.

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Parkway Properties

Dividend Yield: 4.50%

Parkway Properties (NYSE: PKY) shares currently have a dividend yield of 4.50%.

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 15.31.

The average volume for Parkway Properties has been 959,400 shares per day over the past 30 days. Parkway Properties has a market cap of $1.9 billion and is part of the real estate industry. Shares are up 7% 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 compelling growth in net income, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.

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 Real Estate Investment Trusts (REITs) industry. The net income increased by 743.9% when compared to the same quarter one year prior, rising from $7.28 million to $61.39 million.
  • The gross profit margin for PARKWAY PROPERTIES INC is rather low; currently it is at 23.32%. 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 55.03% significantly outperformed against the industry.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, PARKWAY PROPERTIES INC's return on equity is below that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $6.45 million or 30.36% 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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