TheStreet.com TV Recap: Hovnanian Hapless

The only reason Hovnanian (HOV Quote) can talk about its cash flow being positive for 2008 is because the company canceled its preferred dividend, Jim Cramer said on TheStreet.com TV's Wall St. Confidential Web video Wednesday.

People have been saying that maybe the worst is over for the homebuilders and that Hovnanian has done a great job selling land, but this is not accurate.

"What they did is they screwed the preferred guys," Cramer said. "When you do that and then you trumpet the fact that you might be taken over, but you don't want to be with Toll Brothers(TOL Quote) and you talk about [how you're] very pleased with your cash management, I'm aghast.

Cramer: Hovnanian Must Be Crazy

"When you say you're pleased with your cash management, I mean what the heck is that?" he said. "You canceled the darn dividend."

Hovnanian's 40% contract-cancellation rate shows Cramer that once again things are getting worse, not better. "Hovnanian is proud of the fact that it's cut its land holdings big, but what they leave out is that their land holdings were way too outsized to begin with," he explained. "This was a bad quarter, and they're trying to say that it wasn't a bad quarter.

"I have seen this from housing companies time and time again with the exception of Toll Brothers, which is that they keep making you feel better in the face of absolutely nothing being better," Cramer said. "This was a travesty quarter, and for them to be proud of the fact that they canceled their dividend as how they made their money is embarrassing."

People must start telling the "abject truth" about these homebuilders, which is that they must be avoided, he said.

"I don't find value in any company that just canceled its preferred dividend," Cramer said. "That's just a sign that the common stock ... may be just really dangerous."