4 Sell-Rated Dividend Stocks: WLT, MTGE, OAK, ECA

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."

Walter Energy

Dividend Yield: 5.00%

Walter Energy (NYSE: WLT) shares currently have a dividend yield of 5.00%.

Walter Energy, Inc. produces and exports metallurgical coal for the steel industry. It also produces thermal and industrial coal, anthracite, metallurgical coke, coal bed methane gas, and other related products.

The average volume for Walter Energy has been 8,346,000 shares per day over the past 30 days Walter Energy has a market cap of $630.1 million and is part of the metals & mining industry Shares are down 71% year to date as of the close of trading on Friday

TheStreet Ratings rates Walter Energy 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 Metals & Mining industry. The net income has significantly decreased by 221.7% when compared to the same quarter one year ago, falling from $40.62 million to -$49.44 million.
  • The debt-to-equity ratio is very high at 2.76 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, WLT maintains a poor quick ratio of 0.95, which illustrates the inability to avoid short-term cash problems.
  • 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 Metals & Mining industry and the overall market, WALTER ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for WALTER ENERGY INC is currently extremely low, coming in at 11.30%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -10.06% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$19.40 million or 127.37% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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

American Capital Mortgage Investment

Dividend Yield: 18.10%

American Capital Mortgage Investment (NASDAQ: MTGE) shares currently have a dividend yield of 18.10%.

American Capital Mortgage Investment Corp. operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 2.72

The average volume for American Capital Mortgage Investment has been 1,368,200 shares per day over the past 30 days American Capital Mortgage Investment has a market cap of $1.0 billion and is part of the real estate industry Shares are down 24.9% year to date as of the close of trading on Friday

TheStreet Ratings rates American Capital Mortgage Investment as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 224.6% when compared to the same quarter one year ago, falling from $21.32 million to -$26.57 million.
  • The share price of AMERICAN CAPITAL MTG INV CP has not done very well: it is down 24.80% 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.
  • AMERICAN CAPITAL MTG INV 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, AMERICAN CAPITAL MTG INV CP increased its bottom line by earning $8.40 versus $1.72 in the prior year. For the next year, the market is expecting a contraction of 61.3% in earnings ($3.25 versus $8.40).
  • MTGE, with its very weak revenue results, has greatly underperformed against the industry average of 7.7%. Since the same quarter one year prior, revenues plummeted by 54.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for AMERICAN CAPITAL MTG INV CP is rather high; currently it is at 53.20%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, MTGE's net profit margin of -199.79% significantly underperformed when compared to the industry average.

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

Oaktree Capital Group

Dividend Yield: 10.80%

Oaktree Capital Group (NYSE: OAK) shares currently have a dividend yield of 10.80%.

Oaktree Capital Group, LLC operates as a global investment management firm that focuses on alternative markets. The company has a P/E ratio of 10.30

The average volume for Oaktree Capital Group has been 382,900 shares per day over the past 30 days Oaktree Capital Group has a market cap of $1.6 billion and is part of the financial services industry Shares are up 15.2% year to date as of the close of trading on Friday

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, slightly underperformed the industry average of 20.6%. 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.
  • Net operating cash flow has increased to $2,257.11 million or 11.23% when compared to the same quarter last year. Despite an increase in cash flow of 11.23%, OAKTREE CAPITAL GROUP LLC is still growing at a significantly lower rate than the industry average of 127.39%.
  • 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, OAKTREE CAPITAL GROUP LLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • This stock has increased by 49.03% 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.

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

Encana

Dividend Yield: 4.70%

Encana (NYSE: ECA) shares currently have a dividend yield of 4.70%.

Encana Corporation and its subsidiaries engage in the exploration for, development, production, and marketing of natural gas, oil, and natural gas liquids in Canada and the United States.

The average volume for Encana has been 4,625,000 shares per day over the past 30 days Encana has a market cap of $12.5 billion and is part of the energy industry Shares are down 14.3% year to date as of the close of trading on Friday

TheStreet Ratings rates Encana 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, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • ENCANA 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, ENCANA CORP swung to a loss, reporting -$3.79 versus $0.15 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 3691.7% when compared to the same quarter one year ago, falling from $12.00 million to -$431.00 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 Oil, Gas & Consumable Fuels industry and the overall market, ENCANA CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ENCANA CORP is currently lower than what is desirable, coming in at 33.40%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -40.69% is significantly below that of the industry average.
  • Net operating cash flow has decreased to $338.00 million or 45.21% 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.

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