What To Sell: 3 Sell-Rated Dividend Stocks AGNC, PBF, HTS

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."

American Capital Agency

Dividend Yield: 11.20%

American Capital Agency (NASDAQ: AGNC) shares currently have a dividend yield of 11.20%.

American Capital Agency Corp. operates as a real estate investment trust (REIT).

The average volume for American Capital Agency has been 3,374,800 shares per day over the past 30 days. American Capital Agency has a market cap of $8.2 billion and is part of the real estate industry. Shares are up 20.8% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates American Capital Agency 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 and disappointing return on equity.

Highlights from the ratings report include:
  • AMERICAN CAPITAL AGENCY 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 year. We anticipate that this should continue in the coming year. During the past fiscal year, AMERICAN CAPITAL AGENCY CORP reported lower earnings of $3.17 versus $4.40 in the prior year. For the next year, the market is expecting a contraction of 65.9% in earnings ($1.08 versus $3.17).
  • 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 98.3% when compared to the same quarter one year ago, falling from $1,829.00 million to $32.00 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 Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN CAPITAL AGENCY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • In its most recent trading session, AGNC 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.
  • The gross profit margin for AMERICAN CAPITAL AGENCY CORP is currently very high, coming in at 91.15%. Regardless of AGNC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AGNC's net profit margin of 7.86% is significantly lower than the industry average.

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

PBF Energy

Dividend Yield: 4.60%

PBF Energy (NYSE: PBF) shares currently have a dividend yield of 4.60%.

PBF Energy Inc., together with its subsidiaries, is engaged in the refining and supply of petroleum products. The company has a P/E ratio of 15.61.

The average volume for PBF Energy has been 1,898,200 shares per day over the past 30 days. PBF Energy has a market cap of $2.3 billion and is part of the energy industry. Shares are down 17.6% year-to-date as of the close of trading on Friday.

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

TheStreet Ratings rates PBF Energy as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PBF ENERGY INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for PBF ENERGY INC is currently extremely low, coming in at 2.93%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.39% trails that of the industry average.
  • PBF ENERGY 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. 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, PBF ENERGY INC reported lower earnings of $1.35 versus $37.61 in the prior year. This year, the market expects an improvement in earnings ($2.71 versus $1.35).
  • Compared to where it was a year ago, the stock is now trading at a higher level, and has traded in line with the S&P 500. 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.
  • The current debt-to-equity ratio, 0.51, is low and is below the industry average, implying that there has been successful management of debt levels.

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

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 966,200 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 20.1% year-to-date as of the close of trading on Friday.

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

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, weak operating cash flow 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 117.6% when compared to the same quarter one year ago, falling from $70.74 million to -$12.48 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 $91.37 million or 14.48% 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.
  • 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 ($1.04 versus -$1.60).
  • In its most recent trading session, HTS 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.

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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