3 Sell-Rated Dividend Stocks: ERF, FULL, OHAI

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."

Enerplus

Dividend Yield: 9.70%

Enerplus (NYSE: ERF) shares currently have a dividend yield of 9.70%.

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 1,756,100 shares per day over the past 30 days. Enerplus has a market cap of $557.7 million and is part of the energy industry. Shares are down 18.4% 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 feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • 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. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, ENERPLUS CORP swung to a loss, reporting -$7.39 versus $1.43 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 512.1% when compared to the same quarter one year ago, falling from $151.65 million to -$624.99 million.
  • The debt-to-equity ratio of 1.36 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, ERF has a quick ratio of 0.56, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • 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, ENERPLUS 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 $76.50 million or 65.10% 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.

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Full Circle Capital

Dividend Yield: 18.90%

Full Circle Capital (NASDAQ: FULL) shares currently have a dividend yield of 18.90%.

Full Circle Capital Corporation is a business development company specializing in debt and equity securities of smaller and lower middle-market companies.

The average volume for Full Circle Capital has been 73,100 shares per day over the past 30 days. Full Circle Capital has a market cap of $49.9 million and is part of the financial services industry. Shares are down 8.1% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Full Circle Capital 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 Capital Markets industry. The net income has significantly decreased by 2243.2% when compared to the same quarter one year ago, falling from $0.23 million to -$4.91 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Capital Markets industry and the overall market, FULL CIRCLE CAPITAL 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 41.27%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1150.00% 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.
  • FULL, with its very weak revenue results, has greatly underperformed against the industry average of 4.2%. Since the same quarter one year prior, revenues plummeted by 204.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • FULL CIRCLE CAPITAL 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 reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FULL CIRCLE CAPITAL CORP continued to lose money by earning -$0.41 versus -$0.83 in the prior year. This year, the market expects an improvement in earnings ($0.34 versus -$0.41).

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OHA Investment

Dividend Yield: 17.80%

OHA Investment (NASDAQ: OHAI) shares currently have a dividend yield of 17.80%.

OHA Investment Corporation is a business development company specializing in investments in small and mid size and middle market private companies. The company has a P/E ratio of 7.50.

The average volume for OHA Investment has been 38,600 shares per day over the past 30 days. OHA Investment has a market cap of $54.5 million and is part of the financial services industry. Shares are down 27.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates OHA Investment 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:
  • OHA INVESTMENT CORP's earnings per share declined by 10.0% in the most recent quarter compared to 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, OHA INVESTMENT CORP swung to a loss, reporting -$1.08 versus $0.19 in the prior year.
  • 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 Capital Markets industry and the overall market, OHA INVESTMENT 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 -$20.23 million or 189.41% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Looking at the price performance of OHAI's shares over the past 12 months, there is not much good news to report: the stock is down 44.22%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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 exceeded that of the S&P 500 and greatly outperformed compared to the Capital Markets industry average. The net income has decreased by 9.3% when compared to the same quarter one year ago, dropping from -$6.08 million to -$6.65 million.

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