3 Sell-Rated Dividend Stocks: HSON, ERF, IFMI

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."

Hudson Global

Dividend Yield: 7.10%

Hudson Global (NASDAQ: HSON) shares currently have a dividend yield of 7.10%.

Hudson Global, Inc. provides professional-level recruitment and related talent solutions for small to large-sized corporations and government agencies worldwide. The company has a P/E ratio of 56.60.

The average volume for Hudson Global has been 25,600 shares per day over the past 30 days. Hudson Global has a market cap of $100.4 million and is part of the diversified services industry. Shares are down 4.5% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Hudson Global as a sell. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • HSON is off 7.70% from its price level of one year ago, reflecting the general market trend and ignoring their higher earnings per share compared to the year-earlier quarter. 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 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 Professional Services industry and the overall market, HUDSON GLOBAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • HSON, with its decline in revenue, underperformed when compared the industry average of 3.5%. Since the same quarter one year prior, revenues fell by 26.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 41.03% is the gross profit margin for HUDSON GLOBAL INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.89% is in-line with the industry average.
  • Net operating cash flow has significantly increased by 299.09% to $4.83 million when compared to the same quarter last year. In addition, HUDSON GLOBAL INC has also vastly surpassed the industry average cash flow growth rate of 8.29%.

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Enerplus

Dividend Yield: 7.30%

Enerplus (NYSE: ERF) shares currently have a dividend yield of 7.30%.

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 1,714,300 shares per day over the past 30 days. Enerplus has a market cap of $743.5 million and is part of the energy industry. Shares are up 2.9% year-to-date as of the close of trading on Thursday.

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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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Institutional Financial Markets

Dividend Yield: 9.90%

Institutional Financial Markets (AMEX: IFMI) shares currently have a dividend yield of 9.90%.

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 8.10.

The average volume for Institutional Financial Markets has been 13,100 shares per day over the past 30 days. Institutional Financial Markets has a market cap of $10.8 million and is part of the financial services industry. Shares are down 31% 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 poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The gross profit margin for INSTITUTIONAL FINANCIAL MKTS is currently extremely low, coming in at 5.48%. Regardless of IFMI's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, IFMI's net profit margin of -4.12% significantly underperformed when compared to the industry average.
  • 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 52.15%, 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. When compared to other companies in the Capital Markets industry and the overall market, INSTITUTIONAL FINANCIAL MKTS's return on equity is below that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 50.51% to -$0.97 million when compared to the same quarter last year. Despite an increase in cash flow of 50.51%, INSTITUTIONAL FINANCIAL MKTS is still growing at a significantly lower rate than the industry average of 142.81%.
  • 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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