4 Sell-Rated Dividend Stocks: PAAS, ERF, TROX, XCO

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."

Pan American Silver Corporation

Dividend Yield: 4.10%

Pan American Silver Corporation (NASDAQ: PAAS) shares currently have a dividend yield of 4.10%.

Pan American Silver Corp. engages in the exploration, development, and operation of silver producing properties and assets. It produces and sells silver, gold, copper, lead, and zinc.

The average volume for Pan American Silver Corporation has been 2,023,800 shares per day over the past 30 days. Pan American Silver Corporation has a market cap of $1.9 billion and is part of the metals & mining industry. Shares are up 3.8% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Pan American Silver 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:
  • PAN AMERICAN SILVER CORP's earnings per share declined by 40.0% 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 two years. During the past fiscal year, PAN AMERICAN SILVER CORP reported lower earnings of $0.56 versus $3.01 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 Metals & Mining industry. The net income has significantly decreased by 37.3% when compared to the same quarter one year ago, falling from $22.58 million to $14.15 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 Metals & Mining industry and the overall market on the basis of return on equity, PAN AMERICAN SILVER CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Net operating cash flow has decreased to $40.73 million or 48.77% 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 37.85%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 40.00% 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: 5.80%

Enerplus (NYSE: ERF) shares currently have a dividend yield of 5.80%.

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 663,100 shares per day over the past 30 days. Enerplus has a market cap of $3.5 billion and is part of the energy industry. Shares are down 4.6% year-to-date as of the close of trading on Tuesday.

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 31.29% 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.

Tronox

Dividend Yield: 4.30%

Tronox (NYSE: TROX) shares currently have a dividend yield of 4.30%.

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 620,400 shares per day over the past 30 days. Tronox has a market cap of $1.4 billion and is part of the chemicals industry. Shares are up 1.3% year-to-date as of the close of trading on Tuesday.

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.

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 4,833,400 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 9.2% year-to-date as of the close of trading on Tuesday.

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 has underperformed the S&P 500 Index, declining 23.00% from its price level of one year ago. 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.
  • 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 ($0.34 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.

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