3 Sell-Rated Dividend Stocks: IFMI, TGA, TAC

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."

Institutional Financial Markets

Dividend Yield: 7.30%

Institutional Financial Markets (AMEX: IFMI) shares currently have a dividend yield of 7.30%.

Institutional Financial Markets, Inc. is a publicly owned investment manager. The firm primarily provides its services to individuals and institutions. It manages separate client-focused fixed income portfolios. Institutional Financial Markets, Inc. The company has a P/E ratio of 22.00.

The average volume for Institutional Financial Markets has been 8,900 shares per day over the past 30 days. Institutional Financial Markets has a market cap of $16.9 million and is part of the financial services industry. Shares are down 34.3% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Institutional Financial Markets 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:
  • IFMI'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 39.82%, 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. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
  • The gross profit margin for INSTITUTIONAL FINANCIAL MKTS is currently extremely low, coming in at 6.68%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.12% is significantly below that of the industry average.
  • 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 Capital Markets industry and the overall market, INSTITUTIONAL FINANCIAL MKTS's return on equity significantly trails that of both the industry average and the S&P 500.
  • IFMI, with its decline in revenue, underperformed when compared the industry average of 6.8%. Since the same quarter one year prior, revenues fell by 22.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • INSTITUTIONAL FINANCIAL MKTS 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. During the past fiscal year, INSTITUTIONAL FINANCIAL MKTS continued to lose money by earning -$0.17 versus -$1.09 in the prior year.

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TransGlobe Energy

Dividend Yield: 7.10%

TransGlobe Energy (NASDAQ: TGA) shares currently have a dividend yield of 7.10%.

TransGlobe Energy Corporation acquires, explores, develops, and produces oil and gas properties. The company operates through two segments, the Arab Republic of Egypt and the Republic of Yemen.

The average volume for TransGlobe Energy has been 162,900 shares per day over the past 30 days. TransGlobe Energy has a market cap of $206.7 million and is part of the energy industry. Shares are down 35.3% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates TransGlobe Energy 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 and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • TRANSGLOBE ENERGY 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. During the past fiscal year, TRANSGLOBE ENERGY CORP swung to a loss, reporting -$0.02 versus $0.57 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 167.1% when compared to the same quarter one year ago, falling from $16.69 million to -$11.20 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 Oil, Gas & Consumable Fuels industry and the overall market, TRANSGLOBE ENERGY 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 54.54%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 177.27% 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.
  • 46.46% is the gross profit margin for TRANSGLOBE ENERGY CORP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, TGA's net profit margin of -38.76% significantly underperformed when compared to the industry average.

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TransAlta

Dividend Yield: 13.50%

TransAlta (NYSE: TAC) shares currently have a dividend yield of 13.50%.

TransAlta Corporation operates as a non-regulated electricity generation and energy marketing company in Canada, the United States, and Western Australia. The company's Generation segment owns and operates hydro, wind, and natural gas- and coal-fired facilities. The company has a P/E ratio of 86.00.

The average volume for TransAlta has been 150,000 shares per day over the past 30 days. TransAlta has a market cap of $1.5 billion and is part of the utilities industry. Shares are down 45.1% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates TransAlta as a sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, unimpressive growth in net income and weak operating cash flow.

Highlights from the ratings report include:
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 52.62%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 161.11% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
  • 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 Independent Power Producers & Energy Traders industry. The net income has significantly decreased by 200.0% when compared to the same quarter one year ago, falling from -$40.00 million to -$120.00 million.
  • Net operating cash flow has significantly decreased to -$39.00 million or 176.47% 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 return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Independent Power Producers & Energy Traders industry and the overall market on the basis of return on equity, TRANSALTA CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The gross profit margin for TRANSALTA CORP is rather high; currently it is at 52.51%. Regardless of TAC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TAC's net profit margin of -27.39% significantly underperformed when compared to the industry average.

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