3 Hold-Rated Dividend Stocks: CYS, SIR, NOK

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."

CYS Investments

Dividend Yield: 11.30%

CYS Investments (NYSE: CYS) shares currently have a dividend yield of 11.30%.

CYS Investments, Inc., a specialty finance company, makes leveraged investments in whole-pool residential mortgage pass-through securities where the principal and interest payments are guaranteed. The company has a P/E ratio of 10.06.

The average volume for CYS Investments has been 1,461,600 shares per day over the past 30 days. CYS Investments has a market cap of $1.3 billion and is part of the real estate industry. Shares are up 25.5% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates CYS Investments as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income and attractive valuation levels. However, as a counter to these strengths, we find that the company's revenue growth has not been good.

Highlights from the ratings report include:
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • 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 157.9% when compared to the same quarter one year prior, rising from -$97.04 million to $56.21 million.
  • CYS INVESTMENTS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CYS INVESTMENTS INC swung to a loss, reporting -$0.17 versus $2.51 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus -$0.17).
  • CYS, with its decline in revenue, underperformed when compared the industry average of 10.4%. Since the same quarter one year prior, revenues slightly dropped by 6.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CYS INVESTMENTS INC's return on equity is below that of both the industry average and the S&P 500.

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Select Income REIT

Dividend Yield: 7.60%

Select Income REIT (NASDAQ: SIR) shares currently have a dividend yield of 7.60%.

Select Income REIT, a real estate investment trust (REIT), primarily owns and invests in single tenant and net leased properties. The company has a P/E ratio of 22.85.

The average volume for Select Income REIT has been 417,200 shares per day over the past 30 days. Select Income REIT has a market cap of $2.4 billion and is part of the real estate industry. Shares are up 40.1% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Select Income REIT as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income and revenue growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 35.27% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry average. The net income increased by 5.5% when compared to the same quarter one year prior, going from $29.14 million to $30.75 million.
  • The gross profit margin for SELECT INCOME REIT is rather high; currently it is at 50.98%. Regardless of SIR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SIR's net profit margin of 26.64% compares favorably to the industry average.
  • SELECT INCOME REIT's earnings per share improvement from the most recent quarter was slightly positive. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SELECT INCOME REIT reported lower earnings of $0.84 versus $1.91 in the prior year. This year, the market expects an improvement in earnings ($1.45 versus $0.84).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, SELECT INCOME REIT's return on equity is below that of both the industry average and the S&P 500.

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Nokia Oyj

Dividend Yield: 5.00%

Nokia Oyj (NYSE: NOK) shares currently have a dividend yield of 5.00%.

Nokia Corporation, together with its subsidiaries, provides network infrastructure and related services worldwide. It operates in five business groups: Mobile Networks, Fixed Networks, IP/Optical Networks, Applications & Analytics, and Nokia Technologies. The company has a P/E ratio of 8.21.

The average volume for Nokia Oyj has been 13,936,800 shares per day over the past 30 days. Nokia Oyj has a market cap of $32.8 billion and is part of the telecommunications industry. Shares are down 17.8% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Nokia Oyj as a hold. The company's strengths can be seen in multiple areas, such as its robust 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, feeble growth in the company's earnings per share and deteriorating net income.

Highlights from the ratings report include:
  • NOK's very impressive revenue growth greatly exceeded the industry average of 1.0%. Since the same quarter one year prior, revenues leaped by 102.5%. 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.
  • NOK's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, NOK has a quick ratio of 1.59, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 46.58% is the gross profit margin for NOKIA CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -9.15% is in-line with the industry average.
  • NOKIA 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. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, NOKIA CORP reported lower earnings of $0.33 versus $0.82 in the prior year. For the next year, the market is expecting a contraction of 33.3% in earnings ($0.22 versus $0.33).
  • 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 Communications Equipment industry. The net income has significantly decreased by 407.3% when compared to the same quarter one year ago, falling from $190.12 million to -$584.31 million.

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