What To Sell: 3 Sell-Rated Dividend Stocks HTS, CLI, NAT

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 which could 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 3 stocks with substantial yields, that ultimately, we have rated "Sell."

Hatteras Financial

Dividend Yield: 10.20%

Hatteras Financial (NYSE: HTS) shares currently have a dividend yield of 10.20%.

Hatteras Financial Corp. operates as an externally-managed mortgage real estate investment trust (REIT) in the United States.

The average volume for Hatteras Financial has been 987,700 shares per day over the past 30 days. Hatteras Financial has a market cap of $1.9 billion and is part of the real estate industry. Shares are up 20.6% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Hatteras Financial 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 75.0% when compared to the same quarter one year ago, falling from $67.24 million to $16.80 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.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.22%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 80.64% 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.
  • 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. 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, HATTERAS FINANCIAL CORP swung to a loss, reporting -$1.60 versus $3.65 in the prior year. This year, the market expects an improvement in earnings ($1.90 versus -$1.60).
  • HTS, with its decline in revenue, underperformed when compared the industry average of 8.3%. Since the same quarter one year prior, revenues fell by 18.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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: 5.90%

Mack-Cali Realty (NYSE: CLI) shares currently have a dividend yield of 5.90%.

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 1,103,000 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 5.1% 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, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself.

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 232.4% when compared to the same quarter one year ago, falling from $11.56 million to -$15.30 million.
  • 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. 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 gross profit margin for MACK-CALI REALTY CORP is currently extremely low, coming in at 7.30%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -9.06% is significantly below that of the industry average.
  • Net operating cash flow has decreased to $27.47 million or 44.01% when compared to the same quarter last year. Despite a decrease in cash flow MACK-CALI REALTY CORP is still fairing well by exceeding its industry average cash flow growth rate of -70.87%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 25.45%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 312.50% 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.

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

Nordic American Tankers

Dividend Yield: 10.90%

Nordic American Tankers (NYSE: NAT) shares currently have a dividend yield of 10.90%.

Nordic American Tankers Limited, a tanker company, is engaged in acquiring and chartering double-hull tankers. Its fleet consists of 20 double-hull Suezmax tankers that average approximately 156,000 deadweight tons each. The company was founded in 1995 and is headquartered in Hamilton, Bermuda.

The average volume for Nordic American Tankers has been 1,349,600 shares per day over the past 30 days. Nordic American Tankers has a market cap of $752.7 million and is part of the transportation industry. Shares are down 13% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Nordic American Tankers as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow, 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 Oil, Gas & Consumable Fuels industry and the overall market, NORDIC AMERICAN TANKERS LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$18.25 million or 180.68% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for NORDIC AMERICAN TANKERS LTD is currently extremely low, coming in at 8.15%. Regardless of NAT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, NAT's net profit margin of -33.75% significantly underperformed when compared to the industry average.
  • In its most recent trading session, NAT 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. 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.
  • NORDIC AMERICAN TANKERS LTD has improved earnings per share by 49.2% 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, NORDIC AMERICAN TANKERS LTD reported poor results of -$1.67 versus -$1.38 in the prior year. This year, the market expects an improvement in earnings (-$0.37 versus -$1.67).

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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