Sell-Rated Dividend Stocks: Top 5 Companies: CYS, MTGE, TROX, HTS, HLSS

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

CYS Investments

Dividend Yield: 17.60%

CYS Investments (NYSE: CYS) shares currently have a dividend yield of 17.60%.

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 3,436,000 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 34.5% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates CYS Investments 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:
  • 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 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 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 other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CYS INVESTMENTS INC'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 36.43%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 90.41% 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 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. Along with this, the net profit margin of 35.69% significantly outperformed against 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: 15.30%

American Capital Mortgage Investment (NASDAQ: MTGE) shares currently have a dividend yield of 15.30%.

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 729,500 shares per day over the past 30 days. American Capital Mortgage Investment has a market cap of $969.2 million and is part of the real estate industry. Shares are down 21.7% 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 generally disappointing historical performance in the stock itself, deteriorating net income, disappointing return on equity, weak operating cash flow and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • The share price of AMERICAN CAPITAL MTG INV CP has not done very well: it is down 23.85% 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.
  • 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 90.6% when compared to the same quarter one year ago, falling from $146.24 million to $13.70 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 Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN CAPITAL MTG INV CP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$4.57 million or 109.48% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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).

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

Tronox

Dividend Yield: 4.70%

Tronox (NYSE: TROX) shares currently have a dividend yield of 4.70%.

Tronox Limited produces and markets titanium ore and titanium dioxide in the Americas, Europe, and the Asia-Pacific. It offers titanium dioxide pigment, which is used in consumer products, such as paint, plastic, and certain specialty products.

The average volume for Tronox has been 653,100 shares per day over the past 30 days. Tronox has a market cap of $1.3 billion and is part of the chemicals industry. Shares are up 15.9% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Tronox 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 high debt management risk 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 Chemicals industry. The net income has significantly decreased by 222.4% when compared to the same quarter one year ago, falling from -$15.20 million to -$49.00 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 Chemicals industry and the overall market, TRONOX LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for TRONOX LTD is currently lower than what is desirable, coming in at 25.46%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -9.97% is significantly below that of the industry average.
  • The debt-to-equity ratio of 1.04 is relatively high when compared with the industry average, suggesting a need for better debt level management. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 5.67, which shows the ability to cover short-term cash needs.
  • TRONOX LTD 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, TRONOX LTD increased its bottom line by earning $13.14 versus $11.06 in the prior year. For the next year, the market is expecting a contraction of 109.8% in earnings (-$1.29 versus $13.14).

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: 13.20%

Hatteras Financial Corporation (NYSE: HTS) shares currently have a dividend yield of 13.20%.

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 1,259,100 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 32.6% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Hatteras Financial 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, weak operating cash flow and generally disappointing historical performance in the stock itself.

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 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 411.9% when compared to the same quarter one year ago, falling from $84.05 million to -$262.15 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 Real Estate Investment Trusts (REITs) industry and the overall market, HATTERAS FINANCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $79.43 million or 30.50% 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.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 36.49%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 427.71% 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.

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 11.87.

The average volume for Home Loan Servicing Solutions has been 506,500 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 21.8% year-to-date as of the close of trading on Wednesday.

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.

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