4 Sell-Rated Dividend Stocks

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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 and 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 4 stocks with substantial yields, that ultimately, we have rated "Sell."

Technical Communications

Dividend Yield: 9.58%

Technical Communications (NASDAQ: TCCO) shares currently have a dividend yield of 9.58%.

Technical Communications Corporation designs, develops, manufactures, distributes, markets, and sells communications security devices and systems worldwide.

The average volume for Technical Communications has been 4,800 shares per day over the past 30 days. Technical Communications has a market cap of $7.7 million and is part of the telecommunications industry. Shares are down 7.2% year to date as of the close of trading on Friday.

TheStreet Ratings rates Technical Communications 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 disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • TECHNICAL COMMUNICATIONS CP has exprienced 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, TECHNICAL COMMUNICATIONS CP swung to a loss, reporting -$0.47 versus $1.22 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 Communications Equipment industry. The net income has significantly decreased by 133.4% when compared to the same quarter one year ago, falling from $0.93 million to -$0.31 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 Communications Equipment industry and the overall market, TECHNICAL COMMUNICATIONS CP'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 $0.11 million or 95.78% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 59.14%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 134.00% 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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Paulson Capital

Dividend Yield: 70.59%

Paulson Capital (NASDAQ: PLCC) shares currently have a dividend yield of 70.59%.

Paulson Capital Corp., through its subsidiary, Paulson Investment Company, Inc., operates as a brokerage company primarily in the United States.

The average volume for Paulson Capital has been 1,800 shares per day over the past 30 days. Paulson Capital has a market cap of $4.4 million and is part of the financial services industry. Shares are down 3.8% year to date as of the close of trading on Friday.

TheStreet Ratings rates Paulson Capital as a sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has significantly decreased to -$0.05 million or 109.09% 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.
  • In its most recent trading session, PLCC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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 company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Capital Markets industry average, but is greater than that of the S&P 500. The net income increased by 50.5% when compared to the same quarter one year prior, rising from -$0.66 million to -$0.33 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, PAULSON CAPITAL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • PLCC, with its very weak revenue results, has greatly underperformed against the industry average of 12.3%. Since the same quarter one year prior, revenues plummeted by 84.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

Knightsbridge Tankers

Dividend Yield: 10.00%

Knightsbridge Tankers (NASDAQ: VLCCF) shares currently have a dividend yield of 10.00%.

Knightsbridge Tankers Limited, through its subsidiaries, engages in the seaborne transportation of crude oil and dry bulk cargoes worldwide. The company's customers include oil companies, tanker companies, dry bulk companies, petroleum products traders, government agencies, and other entities. The company has a P/E ratio of 5.26. Currently there is 1 analyst that rates Knightsbridge Tankers a buy, 2 analysts rate it a sell, and 2 rate it a hold.

The average volume for Knightsbridge Tankers has been 178,700 shares per day over the past 30 days. Knightsbridge Tankers has a market cap of $171.1 million and is part of the transportation industry. Shares are up 33.3% year to date as of the close of trading on Friday.

TheStreet Ratings rates Knightsbridge Tankers 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 generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • KNIGHTSBRIDGE TANKERS LTD has exprienced 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, KNIGHTSBRIDGE TANKERS LTD reported lower earnings of $1.33 versus $2.12 in the prior year. For the next year, the market is expecting a contraction of 94.7% in earnings ($0.07 versus $1.33).
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 727.9% when compared to the same quarter one year ago, falling from $9.08 million to -$57.01 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, KNIGHTSBRIDGE TANKERS LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 54.77%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 729.72% 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.
  • The revenue fell significantly faster than the industry average of 6.6%. Since the same quarter one year prior, revenues fell by 39.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

VOC Energy

Dividend Yield: 7.98%

VOC Energy (NYSE: VOC) shares currently have a dividend yield of 7.98%.

VOC Energy Trust owns a term net profits interest of the net proceeds from production of the interests in oil and natural gas properties in the states of Kansas and Texas. It owns an 80% term net profits interest of the net proceeds on the underlying properties. Currently there are no analysts that rate VOC Energy a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for VOC Energy has been 111,300 shares per day over the past 30 days. VOC Energy has a market cap of $221.7 million and is part of the energy industry. Shares are up 1.6% year to date as of the close of trading on Friday.

TheStreet Ratings rates VOC Energy as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 30.2% when compared to the same quarter one year ago, falling from $14.62 million to $10.20 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 39.77%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 30.23% compared to the year-earlier 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.
  • VOC ENERGY TRUST's earnings per share declined by 30.2% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($2.11 versus $1.42).
  • VOC, with its decline in revenue, underperformed when compared the industry average of 3.5%. Since the same quarter one year prior, revenues fell by 29.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for VOC ENERGY TRUST is currently very high, coming in at 100.00%. VOC has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, VOC's net profit margin of 96.14% significantly outperformed against the industry.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

Other helpful dividend tools from TheStreet:

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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