What To Sell: 3 Sell-Rated Dividend Stocks HSC, THRX, APAM

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

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."

Harsco

Dividend Yield: 4.90%

Harsco (NYSE: HSC) shares currently have a dividend yield of 4.90%.

Harsco Corporation provides industrial services and engineered products worldwide. The company operates through three segments: Harsco Metals and Minerals, Harsco Rail, and Harsco Industrial.

The average volume for Harsco has been 633,200 shares per day over the past 30 days. Harsco has a market cap of $1.3 billion and is part of the metals & mining industry. Shares are down 10.8% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Harsco as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, poor profit margins, 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 3.05 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, HSC maintains a poor quick ratio of 0.75, which illustrates the inability to avoid short-term cash problems.
  • The gross profit margin for HARSCO CORP is rather low; currently it is at 20.04%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.38% trails that of the industry average.
  • Net operating cash flow has significantly decreased to $10.47 million or 61.95% 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.
  • HSC'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 34.60%, 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. 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 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 Machinery industry and the overall market, HARSCO CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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Theravance

Dividend Yield: 6.20%

Theravance (NASDAQ: THRX) shares currently have a dividend yield of 6.20%.

Theravance, Inc., a royalty management company, is focused on developing respiratory products.

The average volume for Theravance has been 869,600 shares per day over the past 30 days. Theravance has a market cap of $1.9 billion and is part of the drugs industry. Shares are up 12.6% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Theravance as a sell. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The gross profit margin for THERAVANCE INC is currently extremely low, coming in at 11.19%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -154.68% is significantly below that of the industry average.
  • THRX'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 28.69%, 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. 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.
  • THERAVANCE INC has improved earnings per share by 40.0% 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, THERAVANCE INC reported poor results of -$0.66 versus -$0.30 in the prior year. This year, the market expects an improvement in earnings (-$0.14 versus -$0.66).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 84.2% when compared to the same quarter one year prior, rising from -$67.70 million to -$10.67 million.
  • THRX's very impressive revenue growth greatly exceeded the industry average of 11.3%. Since the same quarter one year prior, revenues leaped by 984.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

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Artisan Partners Asset Management

Dividend Yield: 5.40%

Artisan Partners Asset Management (NYSE: APAM) shares currently have a dividend yield of 5.40%.

Artisan Partners Asset Management Inc is publicly owned investment manager. It provides its services to pension and profit sharing plans, trusts, endowments, foundations, charitable organizations, government entities, private funds and non-U.S. funds, as well as mutual funds, non-U.S. The company has a P/E ratio of 19.00.

The average volume for Artisan Partners Asset Management has been 319,600 shares per day over the past 30 days. Artisan Partners Asset Management has a market cap of $1.7 billion and is part of the financial services industry. Shares are down 11.6% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Artisan Partners Asset Management as a sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and poor profit margins.

Highlights from the ratings report include:
  • APAM has underperformed the S&P 500 Index, declining 19.91% from its price level of one year ago. 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.
  • The gross profit margin for ARTISAN PARTNERS ASSET MGMT is currently lower than what is desirable, coming in at 33.79%. Regardless of APAM's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, APAM's net profit margin of 9.57% is significantly lower than the industry average.
  • ARTISAN PARTNERS ASSET MGMT reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ARTISAN PARTNERS ASSET MGMT continued to lose money by earning -$0.72 versus -$2.02 in the prior year. This year, the market expects an improvement in earnings ($2.98 versus -$0.72).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 125.8% when compared to the same quarter one year prior, rising from $8.64 million to $19.50 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.4%. Since the same quarter one year prior, revenues slightly increased by 0.9%. Growth in the company's revenue appears to have helped boost the earnings per share.

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