4 Sell-Rated Dividend Stocks: HTS, EQR, RPAI, 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."

Hatteras Financial Corporation

Dividend Yield: 11.50%

Hatteras Financial Corporation (NYSE: HTS) shares currently have a dividend yield of 11.50%.

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 1,383,800 shares per day over the past 30 days. Hatteras Financial Corporation has a market cap of $1.7 billion and is part of the real estate industry. Shares are up 8.6% year-to-date as of the close of trading on Tuesday.

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 127.1% in earnings (-$0.99 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 34.20%, 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.

Equity Residential

Dividend Yield: 4.90%

Equity Residential (NYSE: EQR) shares currently have a dividend yield of 4.90%.

Equity Residential, a real estate investment trust (REIT), engages in the acquisition, development, and management of multifamily properties in the United States. The company has a P/E ratio of 406.46.

The average volume for Equity Residential has been 1,950,900 shares per day over the past 30 days. Equity Residential has a market cap of $19.0 billion and is part of the real estate industry. Shares are up 2% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Equity Residential as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins 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 Real Estate Investment Trusts (REITs) industry and the overall market, EQUITY RESIDENTIAL's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for EQUITY RESIDENTIAL is rather low; currently it is at 19.20%. It has decreased significantly from the same period last year. Despite the weak results of the gross profit margin, the net profit margin of 59.98% has significantly outperformed against the industry average.
  • The share price of EQUITY RESIDENTIAL has not done very well: it is down 8.81% 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. 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.
  • EQUITY RESIDENTIAL 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, EQUITY RESIDENTIAL increased its bottom line by earning $0.57 versus $0.15 in the prior year. This year, the market expects an improvement in earnings ($4.33 versus $0.57).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 66.8% when compared to the same quarter one year prior, rising from $226.14 million to $377.19 million.

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

Retail Properties of American

Dividend Yield: 5.20%

Retail Properties of American (NYSE: RPAI) shares currently have a dividend yield of 5.20%.

Inland Western Retail Real Estate Trust, Inc. is a real estate investment trust. It engages in acquisition, development and management of properties. The trust invests in the real estate markets of United States.

The average volume for Retail Properties of American has been 1,418,200 shares per day over the past 30 days. Retail Properties of American has a market cap of $3.0 billion and is part of the real estate industry. Shares are down 0.2% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Retail Properties of American as a sell. Among the areas we feel are negative, one of the most important has been unimpressive growth in net income over time.

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 135.4% when compared to the same quarter one year ago, falling from -$15.95 million to -$37.55 million.
  • In its most recent trading session, RPAI has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
  • RETAIL PPTYS OF AMERICA 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. This year, the market expects an improvement in earnings (-$0.02 versus -$0.03).
  • Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RETAIL PPTYS OF AMERICA INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 119.32% to $76.38 million when compared to the same quarter last year. In addition, RETAIL PPTYS OF AMERICA INC has also vastly surpassed the industry average cash flow growth rate of 8.55%.

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 926,200 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 up 1.3% year-to-date as of the close of trading on Tuesday.

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 17.62% 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 8.55%.

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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