What To Sell: 3 Sell-Rated Dividend Stocks OHAI, RAS, PGH

These 3 dividend stocks are rated a Sell by TheStreet
By TheStreet Wire ,

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."

OHA Investment

Dividend Yield: 10.90%

OHA Investment

(NASDAQ:

OHAI

) shares currently have a dividend yield of 10.90%.

OHA Investment Corporation is a business development company specializing in investments in small and mid size and middle market private companies. The company has a P/E ratio of 12.22.

The average volume for OHA Investment has been 57,300 shares per day over the past 30 days. OHA Investment has a market cap of $88.8 million and is part of the financial services industry. Shares are down 10.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

OHA Investment

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:

  • OHA INVESTMENT CORP's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, OHA INVESTMENT CORP swung to a loss, reporting -$1.08 versus $0.19 in the prior year.
  • 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 Capital Markets industry. The net income has significantly decreased by 1412.5% when compared to the same quarter one year ago, falling from -$0.03 million to -$0.48 million.
  • 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 Capital Markets industry and the overall market, OHA INVESTMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$6.27 million or 130.73% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • This stock's share value has moved by only 32.46% over the past year. 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.

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Rait Financial

Dividend Yield: 15.50%

Rait Financial

(NYSE:

RAS

) shares currently have a dividend yield of 15.50%.

RAIT Financial Trust operates as a self-managed and self-advised real estate investment trust (REIT). The company, through its subsidiaries, invests in, manages, and services real estate-related assets with a focus on commercial real estate.

The average volume for Rait Financial has been 653,700 shares per day over the past 30 days. Rait Financial has a market cap of $423.6 million and is part of the real estate industry. Shares are down 39% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Rait Financial

as a

sell

. 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 Real Estate Investment Trusts (REITs) industry and the overall market, RAIT FINANCIAL TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
  • RAS'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 31.67%, 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. 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.
  • 41.28% is the gross profit margin for RAIT FINANCIAL TRUST which we consider to be strong. Regardless of RAS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RAS's net profit margin of 31.32% compares favorably to the industry average.
  • Net operating cash flow has significantly increased by 537.85% to $95.35 million when compared to the same quarter last year. In addition, RAIT FINANCIAL TRUST has also vastly surpassed the industry average cash flow growth rate of -24.80%.
  • RAIT FINANCIAL TRUST 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, RAIT FINANCIAL TRUST continued to lose money by earning -$3.88 versus -$4.58 in the prior year. This year, the market expects an improvement in earnings (-$0.01 versus -$3.88).

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Pengrowth Energy

Dividend Yield: 19.10%

Pengrowth Energy

(NYSE:

PGH

) shares currently have a dividend yield of 19.10%.

Pengrowth Energy Corporation engages in the acquisition, development, exploration, and production of oil and natural gas assets in the Alberta, British Columbia, Saskatchewan, and Nova Scotia provinces in Canada.

The average volume for Pengrowth Energy has been 1,773,700 shares per day over the past 30 days. Pengrowth Energy has a market cap of $520.5 million and is part of the energy industry. Shares are down 69.6% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Pengrowth Energy

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally high debt management risk.

Highlights from the ratings report include:

  • PENGROWTH ENERGY 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. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, PENGROWTH ENERGY CORP reported poor results of -$1.09 versus -$0.61 in the prior year.
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 731.4% when compared to the same quarter one year ago, falling from $52.20 million to -$329.60 million.
  • 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, PENGROWTH ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $131.70 million or 20.75% when compared to the same quarter last year. Despite a decrease in cash flow of 20.75%, PENGROWTH ENERGY CORP is in line with the industry average cash flow growth rate of -27.14%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 73.83%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 710.00% 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.

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