4 Sell-Rated Dividend Stocks: HLSS, HTS, ERF, 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."

Home Loan Servicing Solutions

Dividend Yield: 7.70%

Home Loan Servicing Solutions (NASDAQ: HLSS) shares currently have a dividend yield of 7.70%.

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 12.08.

The average volume for Home Loan Servicing Solutions has been 504,300 shares per day over the past 30 days. Home Loan Servicing Solutions has a market cap of $1.7 billion and is part of the real estate industry. Shares are up 24% 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.
  • 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.
  • Net operating cash flow has significantly increased by 49924.76% to $160.93 million when compared to the same quarter last year. In addition, HOME LOAN SERVICING SOLTNS has also vastly surpassed the industry average cash flow growth rate of 42.15%.
  • The strong earnings growth this company has enjoyed -- up -- has apparently played a role in driving up its share price by a solid 25.72%. In addition, the rise in the general market has likely contributed to this stock's strong performance during this past year.Regarding the future course of this stock, we feel that the risks involved in investing in HLSS do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
  • 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).

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: 11.90%

Hatteras Financial Corporation (NYSE: HTS) shares currently have a dividend yield of 11.90%.

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 1,299,900 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 31.8% 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 36.05%, 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.

Enerplus

Dividend Yield: 5.60%

Enerplus (NYSE: ERF) shares currently have a dividend yield of 5.60%.

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 646,900 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 Wednesday.

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 39.52% 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.

Mack-Cali Realty

Dividend Yield: 5.60%

Mack-Cali Realty (NYSE: CLI) shares currently have a dividend yield of 5.60%.

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 897,800 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 18.4% 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 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 18.69% 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 8.47%.

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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