3 Sell-Rated Dividend Stocks: PDS, CPG, HTS

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."

Precision Drilling

Dividend Yield: 6.30%

Precision Drilling (NYSE: PDS) shares currently have a dividend yield of 6.30%.

Precision Drilling Corporation provides oil and natural gas drilling and related services and products. The company operates through two segments, Contract Drilling Services; and Completion and Production Services.

The average volume for Precision Drilling has been 2,523,800 shares per day over the past 30 days. Precision Drilling has a market cap of $1.0 billion and is part of the energy industry. Shares are down 13.7% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Precision Drilling as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • PRECISION DRILLING 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, PRECISION DRILLING CORP reported lower earnings of $0.12 versus $0.67 in the prior year.
  • 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 Energy Equipment & Services industry and the overall market, PRECISION DRILLING CORP'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 $61.05 million or 58.39% 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.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 29.20%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 266.66% 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.
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Energy Equipment & Services industry average, but is less than that of the S&P 500. The net income has significantly decreased by 264.2% when compared to the same quarter one year ago, falling from $52.81 million to -$86.70 million.

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Crescent Point Energy

Dividend Yield: 8.10%

Crescent Point Energy (NYSE: CPG) shares currently have a dividend yield of 8.10%.

Crescent Point Energy Corp. acquires, explores, develops, and produces oil and natural gas properties in Western Canada and the United States.

The average volume for Crescent Point Energy has been 1,051,200 shares per day over the past 30 days. Crescent Point Energy has a market cap of $5.3 billion and is part of the energy industry. Shares are down 4.7% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Crescent Point Energy 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, generally high debt management risk 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 178.0% when compared to the same quarter one year ago, falling from $258.06 million to -$201.37 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, CRESCENT POINT ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite currently having a low debt-to-equity ratio of 0.42, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that CPG's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.51 is low and demonstrates weak liquidity.
  • Net operating cash flow has declined marginally to $547.19 million or 6.15% when compared to the same quarter last year. Despite a decrease in cash flow CRESCENT POINT ENERGY CORP is still fairing well by exceeding its industry average cash flow growth rate of -26.87%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 54.63%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 166.66% 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.

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Hatteras Financial

Dividend Yield: 15.10%

Hatteras Financial (NYSE: HTS) shares currently have a dividend yield of 15.10%.

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 1,136,200 shares per day over the past 30 days. Hatteras Financial has a market cap of $1.2 billion and is part of the real estate industry. Shares are down 6.8% year-to-date as of the close of trading on Friday.

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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 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 207.7% when compared to the same quarter one year ago, falling from $77.89 million to -$83.89 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, 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 34.67%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 224.00% 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.
  • HTS, with its decline in revenue, underperformed when compared the industry average of 6.3%. Since the same quarter one year prior, revenues slightly dropped by 3.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for HATTERAS FINANCIAL CORP is currently very high, coming in at 86.25%. Regardless of HTS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HTS's net profit margin of -106.94% significantly underperformed when compared to the industry average.

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