3 Sell-Rated Dividend Stocks: HSC, ERF, CVE

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: 4.80%

Harsco (NYSE: HSC) shares currently have a dividend yield of 4.80%.

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 641,000 shares per day over the past 30 days. Harsco has a market cap of $1.4 billion and is part of the metals & mining industry. Shares are down 9% year-to-date as of the close of trading on Friday.

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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 currently lower than what is desirable, coming in at 28.63%. 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 33.45%, 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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Enerplus

Dividend Yield: 4.80%

Enerplus (NYSE: ERF) shares currently have a dividend yield of 4.80%.

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 1,206,100 shares per day over the past 30 days. Enerplus has a market cap of $2.1 billion and is part of the energy industry. Shares are up 6.3% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Enerplus 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 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 832.3% when compared to the same quarter one year ago, falling from $40.04 million to -$293.21 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 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.
  • Net operating cash flow has declined marginally to $131.10 million or 6.63% when compared to the same quarter last year. Despite a decrease in cash flow ENERPLUS CORP is still fairing well by exceeding its industry average cash flow growth rate of -53.34%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 53.18%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 847.36% 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.
  • ENERPLUS 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. 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 increased its bottom line by earning $1.43 versus $0.23 in the prior year.

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Cenovus Energy

Dividend Yield: 5.00%

Cenovus Energy (NYSE: CVE) shares currently have a dividend yield of 5.00%.

Cenovus Energy Inc., an integrated oil company, develops, produces, and markets crude oil, natural gas liquids (NGLs), and natural gas in Canada with refining operations in the United States.

The average volume for Cenovus Energy has been 2,094,800 shares per day over the past 30 days. Cenovus Energy has a market cap of $14.4 billion and is part of the energy industry. Shares are down 15.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Cenovus Energy 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 370.4% when compared to the same quarter one year ago, falling from $247.00 million to -$668.00 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 Oil, Gas & Consumable Fuels industry and the overall market, CENOVUS ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for CENOVUS ENERGY INC is currently extremely low, coming in at 12.73%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -21.26% is significantly below that of the industry average.
  • Net operating cash flow has decreased to $275.00 million or 39.82% when compared to the same quarter last year. Despite a decrease in cash flow CENOVUS ENERGY INC is still fairing well by exceeding its industry average cash flow growth rate of -53.34%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 40.98%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 360.60% 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.

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