3 Sell-Rated Dividend Stocks: HLSS, PWE, OAK

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

Home Loan Servicing Solutions

Dividend Yield: 7.10%

Home Loan Servicing Solutions (NASDAQ: HLSS) shares currently have a dividend yield of 7.10%.

Home Loan Servicing Solutions, Ltd., through its subsidiaries, engages in the acquisition of mortgage servicing assets. Its mortgage servicing assets consists of servicing advances, mortgage servicing rights, rights to mortgage servicing rights, and other related assets. The company has a P/E ratio of 14.07.

The average volume for Home Loan Servicing Solutions has been 618,800 shares per day over the past 30 days. Home Loan Servicing Solutions has a market cap of $1.4 billion and is part of the real estate industry. Shares are up 25.8% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates Home Loan Servicing Solutions as a sell. The area that we feel has been the company's primary weakness has been its disappointing return on equity.

Highlights from the ratings report include:
  • 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 Thrifts & Mortgage Finance industry and the overall market, HOME LOAN SERVICING SOLTNS's return on equity is below that of both the industry average and the S&P 500.
  • The gross profit margin for HOME LOAN SERVICING SOLTNS is currently very high, coming in at 95.50%. It has increased significantly from the same period last year. Along with this, the net profit margin of 54.98% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 5531.13% to $367.09 million when compared to the same quarter last year. In addition, HOME LOAN SERVICING SOLTNS has also vastly surpassed the industry average cash flow growth rate of -69.62%.
  • This stock has increased by 72.38% over the past year, outperforming the rise in the S&P 500 Index during the same period. Despite the fact that the stock's value has already enjoyed nice gains in the past year, we feel that the risks surrounding an investment in this stock outweigh any potential future returns.
  • HOME LOAN SERVICING SOLTNS 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HOME LOAN SERVICING SOLTNS turned its bottom line around by earning $1.23 versus -$0.01 in the prior year. This year, the market expects an improvement in earnings ($1.83 versus $1.23).

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Penn West Petroleum

Dividend Yield: 11.50%

Penn West Petroleum (NYSE: PWE) shares currently have a dividend yield of 11.50%.

Penn West Petroleum Ltd., an exploration and production company, engages in acquiring, exploring, developing, exploiting, and holding interests in petroleum and natural gas properties and related assets in western Canada. The company has a P/E ratio of 185.80.

The average volume for Penn West Petroleum has been 2,940,000 shares per day over the past 30 days. Penn West Petroleum has a market cap of $4.5 billion and is part of the energy industry. Shares are down 15.3% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates Penn West Petroleum as a sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, feeble growth in its earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 36.95%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 266.66% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
  • PENN WEST PETROLEUM 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. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, PENN WEST PETROLEUM LTD reported lower earnings of $0.37 versus $1.37 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 264.4% when compared to the same quarter one year ago, falling from $59.00 million to -$97.00 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PENN WEST PETROLEUM LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • PWE, with its decline in revenue, underperformed when compared the industry average of 8.8%. Since the same quarter one year prior, revenues fell by 20.7%. 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.

Oaktree Capital Group

Dividend Yield: 9.80%

Oaktree Capital Group (NYSE: OAK) shares currently have a dividend yield of 9.80%.

Oaktree Capital Group, LLC operates as a global investment management firm that focuses on alternative markets. The company has a P/E ratio of 11.82.

The average volume for Oaktree Capital Group has been 222,200 shares per day over the past 30 days. Oaktree Capital Group has a market cap of $1.7 billion and is part of the financial services industry. Shares are up 21.3% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates Oaktree Capital Group as a sell. The area that we feel has been the company's primary weakness has been its declining revenues.

Highlights from the ratings report include:
  • OAK, with its decline in revenue, underperformed when compared the industry average of 5.0%. Since the same quarter one year prior, revenues fell by 20.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 40.60% is the gross profit margin for OAKTREE CAPITAL GROUP LLC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 12.48% trails the industry average.
  • This stock has increased by 39.31% over the past year, outperforming the rise in the S&P 500 Index during the same period. Despite the fact that the stock's value has already enjoyed nice gains in the past year, we feel that the risks surrounding an investment in this stock outweigh any potential future returns.
  • OAKTREE CAPITAL GROUP LLC 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, OAKTREE CAPITAL GROUP LLC turned its bottom line around by earning $3.56 versus -$2.82 in the prior year. This year, the market expects an improvement in earnings ($6.06 versus $3.56).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 209.4% when compared to the same quarter one year prior, rising from $18.61 million to $57.57 million.

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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