5 Sell-Rated Dividend Stocks: AMID, OIBR, EFC, EBR.B, TAC

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

American Midstream Partners

Dividend Yield: 8.20%

American Midstream Partners (NYSE: AMID) shares currently have a dividend yield of 8.20%.

American Midstream Partners, LP engages in gathering, treating, processing, and transporting natural gas in the Gulf Coast and Southeast regions of the United States.

The average volume for American Midstream Partners has been 36,500 shares per day over the past 30 days. American Midstream Partners has a market cap of $98.2 million and is part of the utilities industry. Shares are up 54% year to date as of the close of trading on Friday.

TheStreet Ratings rates American Midstream Partners as a sell. 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 weak operating cash flow.

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 310.1% when compared to the same quarter one year ago, falling from $1.69 million to -$3.55 million.
  • Currently the debt-to-equity ratio of 1.91 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.04, which clearly demonstrates the inability to cover short-term cash needs.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, AMERICAN MIDSTREAM PRTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for AMERICAN MIDSTREAM PRTNRS LP is currently extremely low, coming in at 5.70%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -5.63% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to $1.10 million or 73.63% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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Oi

Dividend Yield: 11.90%

Oi (NYSE: OIBR) shares currently have a dividend yield of 11.90%.

Oi S.A., through its subsidiaries, provides integrated telecommunication services for residential customers, companies, and governmental agencies in Brazil. It operates in three segments: Fixed-Line and Data Transmission Services, Mobile Services, and Other Services.

The average volume for Oi has been 3,294,400 shares per day over the past 30 days. Oi has a market cap of $3.9 billion and is part of the telecommunications industry. Shares are down 45.9% year to date as of the close of trading on Friday.

TheStreet Ratings rates Oi as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, unimpressive growth in net income, generally high debt management risk and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • OI SA 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 two years. We anticipate that this should continue in the coming year. During the past fiscal year, OI SA reported lower earnings of $0.82 versus $0.92 in the prior year. For the next year, the market is expecting a contraction of 69.6% in earnings ($0.25 versus $0.82).
  • 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 Diversified Telecommunication Services industry. The net income has significantly decreased by 46.8% when compared to the same quarter one year ago, falling from $243.94 million to $129.79 million.
  • The debt-to-equity ratio is very high at 3.15 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, OIBR maintains a poor quick ratio of 0.82, which illustrates the inability to avoid short-term cash problems.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 44.39%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 80.64% 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.
  • 43.70% is the gross profit margin for OI SA which we consider to be strong. Regardless of OIBR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.72% trails the industry average.

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Ellington Financial

Dividend Yield: 12.30%

Ellington Financial (NYSE: EFC) shares currently have a dividend yield of 12.30%.

No company description available. The company has a P/E ratio of 4.70.

The average volume for Ellington Financial has been 197,500 shares per day over the past 30 days. Ellington Financial has a market cap of $513.2 million and is part of the real estate industry. Shares are up 11.9% year to date as of the close of trading on Friday.

TheStreet Ratings rates Ellington Financial as a sell. Among the areas we feel are negative, one of the most important has been the company's poor growth in earnings per share.

Highlights from the ratings report include:
  • ELLINGTON FINANCIAL LLC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ELLINGTON FINANCIAL LLC increased its bottom line by earning $5.32 versus $0.61 in the prior year. For the next year, the market is expecting a contraction of 23.4% in earnings ($4.08 versus $5.32).
  • The stock price has risen over the past year, but it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • The gross profit margin for ELLINGTON FINANCIAL LLC is rather high; currently it is at 69.20%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, EFC's net profit margin of 219.42% significantly outperformed against the industry.
  • 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, ELLINGTON FINANCIAL LLC's return on equity exceeds that of both the industry average and the S&P 500.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Capital Markets industry average. The net income increased by 25.8% when compared to the same quarter one year prior, rising from $32.06 million to $40.34 million.

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Centrais Eletricas Brasileiras

Dividend Yield: 12.70%

Centrais Eletricas Brasileiras (NYSE: EBR.B) shares currently have a dividend yield of 12.70%.

Centrais Eletricas Brasileiras S.A. Eletrobras, together with its subsidiaries, engages in the generation, transmission, and distribution of electricity in Brazil. The company has a P/E ratio of 2.10.

The average volume for Centrais Eletricas Brasileiras has been 341,900 shares per day over the past 30 days. Centrais Eletricas Brasileiras has a market cap of $7.4 billion and is part of the utilities industry. Shares are up 8.8% year to date as of the close of trading on Friday.

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

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 Electric Utilities industry. The net income has significantly decreased by 1899.1% when compared to the same quarter one year ago, falling from $285.97 million to -$5,144.79 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 Electric Utilities industry and the overall market, ELETROBRAS-CENTR ELETR BRAS'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 36.54%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1909.52% 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.
  • ELETROBRAS-CENTR ELETR BRAS 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. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ELETROBRAS-CENTR ELETR BRAS swung to a loss, reporting -$2.48 versus $1.48 in the prior year. This year, the market expects an improvement in earnings ($1.48 versus -$2.48).
  • EBR.B, with its decline in revenue, underperformed when compared the industry average of 12.6%. Since the same quarter one year prior, revenues slightly dropped by 0.1%. 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.

TransAlta Corporation

Dividend Yield: 7.60%

TransAlta Corporation (NYSE: TAC) shares currently have a dividend yield of 7.60%.

TransAlta Corporation operates as a non-regulated electricity generation and energy marketing company in Canada, the United States, and Australia. The company engages in the generation and wholesale trade of electricity and other energy-related commodities and derivatives.

The average volume for TransAlta Corporation has been 101,800 shares per day over the past 30 days. TransAlta Corporation has a market cap of $3.8 billion and is part of the utilities industry. Shares are down 2.6% year to date as of the close of trading on Friday.

TheStreet Ratings rates TransAlta Corporation 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, generally disappointing historical performance in the stock itself and generally high debt management risk.

Highlights from the ratings report include:
  • TRANSALTA CORP 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, TRANSALTA CORP swung to a loss, reporting -$2.72 versus $1.30 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 Independent Power Producers & Energy Traders industry. The net income has significantly decreased by 102.1% when compared to the same quarter one year ago, falling from $96.00 million to -$2.00 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 Independent Power Producers & Energy Traders industry and the overall market, TRANSALTA CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The share price of TRANSALTA CORP has not done very well: it is down 11.10% 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. 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.
  • Even though the current debt-to-equity ratio is 1.42, it is still below the industry average, suggesting that this level of debt is acceptable within the Independent Power Producers & Energy Traders industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.41 is very low and demonstrates very weak liquidity.

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.

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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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