Sell-Rated Dividend Stocks In The Top 4: CYS, HLSS, MTGE, HTS

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

CYS Investments

Dividend Yield: 17.00%

CYS Investments (NYSE: CYS) shares currently have a dividend yield of 17.00%.

CYS Investments, Inc., a specialty finance company, makes leveraged investments in whole-pool residential mortgage pass-through securities where the principal and interest payments are guaranteed.

The average volume for CYS Investments has been 3,480,300 shares per day over the past 30 days. CYS Investments has a market cap of $1.3 billion and is part of the real estate industry. Shares are down 31.9% year to date as of the close of trading on Friday.

TheStreet Ratings rates CYS Investments 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:
  • CYS INVESTMENTS INC has experienced 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, CYS INVESTMENTS INC reported lower earnings of $2.75 versus $3.63 in the prior year. For the next year, the market is expecting a contraction of 49.5% in earnings ($1.39 versus $2.75).
  • The net income has significantly decreased by 87.4% when compared to the same quarter one year ago, falling from $241.91 million to $30.57 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 where it was trading one year ago, CYS is down 35.62% to its most recent closing price of 7.99. Looking ahead, our view is that this stock still does not have good upside potential and may even suffer further declines.
  • The gross profit margin for CYS INVESTMENTS INC is currently very high, coming in at 93.46%. It has increased from the same quarter the previous year.

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

Home Loan Servicing Solutions

Dividend Yield: 7.80%

Home Loan Servicing Solutions (NASDAQ: HLSS) shares currently have a dividend yield of 7.80%.

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 11.92.

The average volume for Home Loan Servicing Solutions has been 508,600 shares per day over the past 30 days. Home Loan Servicing Solutions has a market cap of $1.6 billion and is part of the real estate industry. Shares are up 22.4% year to date as of the close of trading on Friday.

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:
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. 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.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
  • HOME LOAN SERVICING SOLTNS has improved earnings per share by 32.4% 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 ($1.91 versus $1.23).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Thrifts & Mortgage Finance industry. The net income increased by 431.3% when compared to the same quarter one year prior, rising from $6.57 million to $34.92 million.
  • The gross profit margin for HOME LOAN SERVICING SOLTNS is currently very high, coming in at 95.21%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 46.32% is above that of 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.

American Capital Mortgage Investment

Dividend Yield: 14.60%

American Capital Mortgage Investment (NASDAQ: MTGE) shares currently have a dividend yield of 14.60%.

American Capital Mortgage Investment Corp. operates as a real estate investment trust (REIT) in the United States.

The average volume for American Capital Mortgage Investment has been 737,700 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 18.8% year to date as of the close of trading on Friday.

TheStreet Ratings rates American Capital Mortgage Investment 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:
  • AMERICAN CAPITAL MTG INV CP has experienced 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 63.9% in earnings ($3.03 versus $8.40).
  • The net income has significantly decreased by 90.6% when compared to the same quarter one year ago, falling from $146.24 million to $13.70 million.
  • Since the same quarter one year prior, revenues plummeted by 56.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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.
  • The gross profit margin for AMERICAN CAPITAL MTG INV CP is currently very high, coming in at 92.41%. Regardless of MTGE's high profit margin, it has managed to decrease from the same period last year.

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

Hatteras Financial Corporation

Dividend Yield: 13.10%

Hatteras Financial Corporation (NYSE: HTS) shares currently have a dividend yield of 13.10%.

Hatteras Financial Corp. operates as an externally-managed mortgage real estate investment trust (REIT) in the United States.

The average volume for Hatteras Financial Corporation has been 1,268,400 shares per day over the past 30 days. Hatteras Financial Corporation has a market cap of $1.6 billion and is part of the real estate industry. Shares are down 32.5% year to date as of the close of trading on Friday.

TheStreet Ratings rates Hatteras Financial Corporation 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:
  • HATTERAS FINANCIAL CORP has experienced 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, HATTERAS FINANCIAL CORP reported lower earnings of $3.65 versus $3.96 in the prior year. For the next year, the market is expecting a contraction of 127.5% in earnings (-$1.01 versus $3.65).
  • The net income has significantly decreased by 411.9% when compared to the same quarter one year ago, falling from $84.05 million to -$262.15 million.
  • Since the same quarter one year prior, revenues plummeted by 182.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 where it was trading one year ago, HTS is down 35.72% to its most recent closing price of 16.76. Looking ahead, our view is that this stock still does not have good upside potential and may even suffer further declines.

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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