What To Sell: 4 Sell-Rated Dividend Stocks ERF, PWE, XCO, 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 4 stocks with substantial yields, that ultimately, we have rated "Sell."

Enerplus

Dividend Yield: 5.50%

Enerplus (NYSE: ERF) shares currently have a dividend yield of 5.50%.

Enerplus Corporation, together with subsidiaries, engages in the exploration and development of crude oil and natural gas in the United States and Canada.

The average volume for Enerplus has been 632,800 shares per day over the past 30 days. Enerplus has a market cap of $3.7 billion and is part of the energy industry. Shares are up 40.5% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Enerplus as a sell. The area that we feel has been the company's primary weakness has been its feeble growth in its earnings per share.

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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ENERPLUS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • ENERPLUS CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, ENERPLUS CORP swung to a loss, reporting -$0.79 versus $0.62 in the prior year.
  • The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.41 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • This stock has increased by 39.60% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in ERF do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 153.6% when compared to the same quarter one year prior, rising from -$63.47 million to $34.02 million.

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: 6.10%

Penn West Petroleum (NYSE: PWE) shares currently have a dividend yield of 6.10%.

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 2,206,900 shares per day over the past 30 days. Penn West Petroleum has a market cap of $4.2 billion and is part of the energy industry. Shares are down 19.5% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Penn West Petroleum as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • 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 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.
  • PWE has underperformed the S&P 500 Index, declining 23.68% from its price level of one year ago. 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.
  • PENN WEST PETROLEUM LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, PENN WEST PETROLEUM LTD reported lower earnings of $0.37 versus $1.37 in the prior year.
  • The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.48 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The gross profit margin for PENN WEST PETROLEUM LTD is rather high; currently it is at 60.85%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 4.57% trails 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.

EXCO Resources

Dividend Yield: 4.10%

EXCO Resources (NYSE: XCO) shares currently have a dividend yield of 4.10%.

EXCO Resources, Inc., an independent oil and natural gas company, engages in the acquisition, exploration, exploitation, development and production of onshore U.S. oil and natural gas properties with a focus on shale resource plays.

The average volume for EXCO Resources has been 4,197,300 shares per day over the past 30 days. EXCO Resources has a market cap of $1.1 billion and is part of the energy industry. Shares are down 23.8% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates EXCO Resources as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The debt-to-equity ratio is very high at 7.66 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.44, which clearly demonstrates the inability to cover short-term cash needs.
  • Net operating cash flow has significantly decreased to $52.14 million or 61.17% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • XCO's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 35.16%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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 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 Oil, Gas & Consumable Fuels industry and the overall market, EXCO RESOURCES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • EXCO RESOURCES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, EXCO RESOURCES INC swung to a loss, reporting -$6.51 versus $0.09 in the prior year. This year, the market expects an improvement in earnings ($0.36 versus -$6.51).

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: 5.70%

Mack-Cali Realty (NYSE: CLI) shares currently have a dividend yield of 5.70%.

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 average volume for Mack-Cali Realty has been 848,900 shares per day over the past 30 days. Mack-Cali Realty has a market cap of $1.8 billion and is part of the real estate industry. Shares are down 19.8% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Mack-Cali Realty as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, 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 67.5% when compared to the same quarter one year ago, falling from $14.28 million to $4.64 million.
  • 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, MACK-CALI REALTY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The share price of MACK-CALI REALTY CORP has not done very well: it is down 17.73% 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.
  • MACK-CALI REALTY 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. 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, MACK-CALI REALTY CORP reported lower earnings of $0.33 versus $0.77 in the prior year. This year, the market expects an improvement in earnings ($0.46 versus $0.33).
  • Net operating cash flow has slightly increased to $38.75 million or 6.11% when compared to the same quarter last year. Despite an increase in cash flow, MACK-CALI REALTY CORP's average is still marginally south of the industry average growth rate of 8.52%.

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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