What To Sell: 3 Sell-Rated Dividend Stocks HTS, BGC, LNCO
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.
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 "Sell."
Dividend Yield: 11.00%
(NYSE:
) shares currently have a dividend yield of 11.00%.
Hatteras Financial Corp. operates as an externally-managed mortgage real estate investment trust (REIT) in the United States. The company has a P/E ratio of 50.50.
The average volume for Hatteras Financial has been 824,700 shares per day over the past 30 days. Hatteras Financial has a market cap of $1.8 billion and is part of the real estate industry. Shares are down 0.4% year-to-date as of the close of trading on Friday.
TheStreet Ratings rates
Hatteras Financial
as a
. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and unimpressive growth in net income.
Highlights from the ratings report include:
- The share price of HATTERAS FINANCIAL CORP has not done very well: it is down 7.30% 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 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 159.3% when compared to the same quarter one year ago, falling from -$9.97 million to -$25.85 million.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, HATTERAS FINANCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- HATTERAS FINANCIAL 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. 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, HATTERAS FINANCIAL CORP turned its bottom line around by earning $0.36 versus -$1.60 in the prior year. This year, the market expects an improvement in earnings ($2.06 versus $0.36).
- The gross profit margin for HATTERAS FINANCIAL CORP is currently very high, coming in at 89.94%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -28.66% is in-line with the industry average.
- You can view the full Hatteras Financial Ratings Report.
Dividend Yield: 4.90%
(NYSE:
) shares currently have a dividend yield of 4.90%.
General Cable Corporation designs, develops, manufactures, markets, and distributes copper, aluminum, and fiber optic wire and cable products for the energy, industrial, construction, specialty, and communications markets worldwide.
The average volume for General Cable has been 784,300 shares per day over the past 30 days. General Cable has a market cap of $721.8 million and is part of the industrial industry. Shares are up 0.9% year-to-date as of the close of trading on Friday.
TheStreet Ratings rates
General Cable
as a
. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.
Highlights from the ratings report include:
- 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 Electrical Equipment industry. The net income has significantly decreased by 1108.7% when compared to the same quarter one year ago, falling from $13.80 million to -$139.20 million.
- The debt-to-equity ratio is very high at 2.81 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, BGC maintains a poor quick ratio of 0.83, which illustrates the inability to avoid short-term cash problems.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Electrical Equipment industry and the overall market, GENERAL CABLE CORP/DE's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for GENERAL CABLE CORP/DE is currently extremely low, coming in at 6.64%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -8.99% is significantly below that of the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 51.70%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1159.25% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full General Cable Ratings Report.
Dividend Yield: 11.30%
(NASDAQ:
) shares currently have a dividend yield of 11.30%.
LinnCo, LLC, through its limited liability company interests in Linn Energy, LLC, focuses on the acquisition and development of oil and natural gas properties in the United States. The company was founded in 2012 and is headquartered in Houston, Texas.
The average volume for LinnCo has been 3,336,900 shares per day over the past 30 days. LinnCo has a market cap of $1.4 billion and is part of the energy industry. Shares are up 6.4% year-to-date as of the close of trading on Friday.
TheStreet Ratings rates
LinnCo
as a
. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself.
Highlights from the ratings report include:
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, LINNCO LLC's return on equity significantly trails that of both the industry average and the S&P 500.
- LNCO'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 64.12%, 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.
- LINNCO LLC 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, LINNCO LLC swung to a loss, reporting -$17.73 versus $0.60 in the prior year. This year, the market expects an improvement in earnings (-$0.34 versus -$17.73).
- The gross profit margin for LINNCO LLC is currently very high, coming in at 100.00%. LNCO has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, LNCO's net profit margin of 68.29% significantly outperformed against the industry.
- Net operating cash flow has significantly increased by 267.62% to $92.69 million when compared to the same quarter last year. In addition, LINNCO LLC has also vastly surpassed the industry average cash flow growth rate of -12.58%.
- You can view the full LinnCo Ratings Report.
Other helpful dividend tools from TheStreet:
- Our dividend calendar.
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