What To Sell: 4 Sell-Rated Dividend Stocks AT, TAC, SXE, UAN

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."

Atlantic Power Corporation

Dividend Yield: 10.90%

Atlantic Power Corporation (NYSE: AT) shares currently have a dividend yield of 10.90%.

Atlantic Power Corporation operates as a power generation and infrastructure company with a portfolio of assets in the United States and Canada.

The average volume for Atlantic Power Corporation has been 1,292,100 shares per day over the past 30 days. Atlantic Power Corporation has a market cap of $414.5 million and is part of the utilities industry. Shares are down 2% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Atlantic Power 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, generally high debt management risk and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • ATLANTIC POWER 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 suffered a declining pattern earnings per share over the past two years. During the past fiscal year, ATLANTIC POWER CORP reported poor results of -$1.10 versus -$0.39 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 Independent Power Producers & Energy Traders industry. The net income has significantly decreased by 452.0% when compared to the same quarter one year ago, falling from -$7.50 million to -$41.40 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 71.37%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 54.54% 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 debt-to-equity ratio is very high at 3.02 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, AT's quick ratio is somewhat strong at 1.05, demonstrating the ability to handle short-term liquidity needs.
  • 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 Independent Power Producers & Energy Traders industry and the overall market, ATLANTIC POWER CORP's return on equity significantly trails 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.

TransAlta Corporation

Dividend Yield: 8.70%

TransAlta Corporation (NYSE: TAC) shares currently have a dividend yield of 8.70%.

TransAlta Corporation operates as a non-regulated electricity generation and energy marketing company in Canada, the United States, and Australia. The company engages in the generation and wholesale trade of electricity and other energy-related commodities and derivatives. The company has a P/E ratio of 57.50.

The average volume for TransAlta Corporation has been 116,000 shares per day over the past 30 days. TransAlta Corporation has a market cap of $3.4 billion and is part of the utilities industry. Shares are up 0.2% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates TransAlta Corporation 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, unimpressive growth in net income and generally high debt management risk.

Highlights from the ratings report include:
  • The share price of TRANSALTA CORP has not done very well: it is down 18.50% 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.
  • TRANSALTA 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. During the past fiscal year, TRANSALTA CORP swung to a loss, reporting -$2.72 versus $1.30 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 Independent Power Producers & Energy Traders industry. The net income has significantly decreased by 100.0% when compared to the same quarter one year ago, falling from $64.00 million to $0.00 million.
  • Even though the current debt-to-equity ratio is 1.40, it is still below the industry average, suggesting that this level of debt is acceptable within the Independent Power Producers & Energy Traders industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.46 is very low and demonstrates very weak liquidity.
  • 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 Independent Power Producers & Energy Traders industry and the overall market on the basis of return on equity, TRANSALTA CORP underperformed against that of the industry average and is significantly less than that of 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.

Southcross Energy Partners

Dividend Yield: 8.90%

Southcross Energy Partners (NYSE: SXE) shares currently have a dividend yield of 8.90%.

Southcross Energy Partners, L.P., a midstream natural gas company, provides natural gas gathering, processing, treating, compression, and transportation services in the United States. It also offers natural gas liquid (NGL) fractionation and transportation services. The company has a P/E ratio of 1.57.

The average volume for Southcross Energy Partners has been 31,700 shares per day over the past 30 days. Southcross Energy Partners has a market cap of $221.3 million and is part of the utilities industry. Shares are up 0.8% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Southcross Energy Partners as a sell. Among the areas we feel are negative, one of the most important has been poor profit margins.

Highlights from the ratings report include:
  • The gross profit margin for SOUTHCROSS ENERGY PRTNRS LP is currently extremely low, coming in at 5.66%. Regardless of SXE's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -2.53% trails the industry average.
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 0.7% when compared to the same quarter one year ago, dropping from -$4.04 million to -$4.07 million.
  • SXE's debt-to-equity ratio of 0.80 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.87 is weak.
  • Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SOUTHCROSS ENERGY PRTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • SXE'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 26.94%, 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.

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

CVR Partners

Dividend Yield: 13.70%

CVR Partners (NYSE: UAN) shares currently have a dividend yield of 13.70%.

CVR Partners, LP engages in the production, distribution, and marketing of nitrogen fertilizers in North America. Its nitrogen fertilizer products include ammonia and urea ammonium nitrate. CVR GP, LLC serves as the general partner of the company. The company has a P/E ratio of 11.77.

The average volume for CVR Partners has been 372,300 shares per day over the past 30 days. CVR Partners has a market cap of $1.2 billion and is part of the chemicals industry. Shares are up 3.3% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates CVR Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, weak operating cash flow, 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 Chemicals industry. The net income has significantly decreased by 37.5% when compared to the same quarter one year ago, falling from $31.56 million to $19.71 million.
  • Net operating cash flow has significantly decreased to $21.90 million or 51.25% 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 34.39%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 37.20% 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.
  • CVR PARTNERS LP's earnings per share declined by 37.2% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CVR PARTNERS LP reported lower earnings of $1.53 versus $1.81 in the prior year. This year, the market expects an improvement in earnings ($1.55 versus $1.53).
  • 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. When compared to other companies in the Chemicals industry and the overall market, CVR PARTNERS LP's return on equity exceeds that of the industry average and significantly exceeds that of 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.

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