3 Sell-Rated Dividend Stocks: VLCCF, STB, EBR

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."

Knightsbridge Tankers

Dividend Yield: 10.90%

Knightsbridge Tankers (NASDAQ: VLCCF) shares currently have a dividend yield of 10.90%.

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 average volume for Knightsbridge Tankers has been 261,700 shares per day over the past 30 days. Knightsbridge Tankers has a market cap of $157.1 million and is part of the transportation industry. Shares are up 21.1% year to date as of the close of trading on Thursday.

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.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

Student Transportation

Dividend Yield: 8.60%

Student Transportation (NASDAQ: STB) shares currently have a dividend yield of 8.60%.

Student Transportation Inc. provides school bus transportation and management services to public and private schools in North America. The company has a P/E ratio of 62.50.

The average volume for Student Transportation has been 84,400 shares per day over the past 30 days. Student Transportation has a market cap of $506.3 million and is part of the diversified services industry. Shares are up 3.1% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Student Transportation 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, unimpressive growth in net income, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • In its most recent trading session, STB 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. 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.
  • STUDENT TRANSPORTATION INC 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, 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 Road & Rail industry. The net income has significantly decreased by 42.2% when compared to the same quarter one year ago, falling from $3.04 million to $1.75 million.
  • The gross profit margin for STUDENT TRANSPORTATION INC is currently lower than what is desirable, coming in at 26.90%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.45% significantly trails the industry average.
  • Net operating cash flow has decreased to $13.70 million or 42.38% 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.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

Centrais Eletricas Brasileiras

Dividend Yield: 7.60%

Centrais Eletricas Brasileiras (NYSE: EBR) shares currently have a dividend yield of 7.60%.

Centrais Eletricas Brasileiras S.A. Eletrobras, together with its subsidiaries, engages in the generation, transmission, and distribution of electricity in Brazil.

The average volume for Centrais Eletricas Brasileiras has been 1,343,000 shares per day over the past 30 days. Centrais Eletricas Brasileiras has a market cap of $3.0 billion and is part of the utilities industry. Shares are down 23.7% year to date as of the close of trading on Thursday.

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, poor profit margins, 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 102.5% when compared to the same quarter one year ago, falling from $696.49 million to -$17.71 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.
  • The gross profit margin for ELETROBRAS-CENTR ELETR BRAS is currently extremely low, coming in at 0.30%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -0.61% trails 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 61.44%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 101.92% 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).

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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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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