Sell-Rated Dividend Stocks: Top 3 Companies: MTGE, PWE, CLI

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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."

American Capital Mortgage Investment

Dividend Yield: 13.40%

American Capital Mortgage Investment (NASDAQ: MTGE) shares currently have a dividend yield of 13.40%.

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 4.48.

The average volume for American Capital Mortgage Investment has been 1,066,600 shares per day over the past 30 days. American Capital Mortgage Investment has a market cap of $1.2 billion and is part of the real estate industry. Shares are down 11.1% year to date as of the close of trading on Wednesday.

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 268.6% when compared to the same quarter one year ago, falling from $32.23 million to -$54.35 million.
  • The share price of AMERICAN CAPITAL MTG INV CP has not done very well: it is down 18.43% 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 62.4% in earnings ($3.16 versus $8.40).
  • MTGE, with its very weak revenue results, has greatly underperformed against the industry average of 10.8%. Since the same quarter one year prior, revenues plummeted by 328.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN CAPITAL MTG INV CP's return on equity is below that of both the industry average and the S&P 500.

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

Penn West Petroleum

Dividend Yield: 4.90%

Penn West Petroleum (NYSE: PWE) shares currently have a dividend yield of 4.90%.

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 average volume for Penn West Petroleum has been 1,896,000 shares per day over the past 30 days. Penn West Petroleum has a market cap of $5.5 billion and is part of the energy industry. Shares are up 3.3% 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 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:
  • 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 117.0% when compared to the same quarter one year ago, falling from $235.00 million to -$40.00 million.
  • 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, PENN WEST PETROLEUM LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $199.00 million or 28.92% 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.
  • The share price of PENN WEST PETROLEUM LTD has not done very well: it is down 24.97% 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. 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.

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

Mack-Cali Realty

Dividend Yield: 5.50%

Mack-Cali Realty (NYSE: CLI) shares currently have a dividend yield of 5.50%.

Mack-Cali Realty Corporation is a real estate investment trust (REIT). It engages in the leasing, management, acquisition, development, and construction of commercial real estate properties in the United States. The company has a P/E ratio of 181.25.

The average volume for Mack-Cali Realty has been 733,700 shares per day over the past 30 days. Mack-Cali Realty has a market cap of $1.9 billion and is part of the real estate industry. Shares are down 16.7% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates Mack-Cali Realty 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, disappointing return on equity, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • The share price of MACK-CALI REALTY CORP has not done very well: it is down 20.32% 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. 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.
  • MACK-CALI REALTY 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. 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, MACK-CALI REALTY CORP reported lower earnings of $0.43 versus $0.77 in the prior year. For the next year, the market is expecting a contraction of 5.8% in earnings ($0.41 versus $0.43).
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, MACK-CALI REALTY CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The gross profit margin for MACK-CALI REALTY CORP is currently extremely low, coming in at 10.22%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 12.96% significantly trails the industry average.
  • Net operating cash flow has decreased to $55.12 million or 30.80% 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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