What To Sell: 3 Sell-Rated Dividend Stocks WMLP, KCAP, CIO
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."
Westmoreland Resource Partners
Dividend Yield: 14.40%
Westmoreland Resource Partners
(NYSE:
) shares currently have a dividend yield of 14.40%.
Westmoreland Resource Partners, LP produces and markets thermal coal in the United States. It also produces surface mined coal in Ohio. The company has a P/E ratio of 11.78.
The average volume for Westmoreland Resource Partners has been 5,200 shares per day over the past 30 days. Westmoreland Resource Partners has a market cap of $31.8 million and is part of the metals & mining industry. Shares are up 50% year-to-date as of the close of trading on Thursday.
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TheStreet Ratings rates
Westmoreland Resource Partners
as a
. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.
Highlights from the ratings report include:
- The debt-to-equity ratio is very high at 96.22 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, WMLP has a quick ratio of 0.69, 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, WESTMORELAND RES PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for WESTMORELAND RES PARTNERS LP is rather low; currently it is at 24.32%. Regardless of WMLP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, WMLP's net profit margin of -9.57% significantly underperformed when compared to the industry average.
- WMLP'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 44.05%, 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 change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 43.1% when compared to the same quarter one year ago, falling from -$6.19 million to -$8.86 million.
- You can view the full Westmoreland Resource Partners Ratings Report.
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Dividend Yield: 15.40%
(NASDAQ:
) shares currently have a dividend yield of 15.40%.
KCAP Financial, Inc. is a business development company specializing in mid market, buyouts, and mezzanine investments. It focuses on mature and middle market companies.
The average volume for KCAP Financial has been 119,300 shares per day over the past 30 days. KCAP Financial has a market cap of $145.1 million and is part of the financial services industry. Shares are down 3.9% year-to-date as of the close of trading on Thursday.
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TheStreet Ratings rates
KCAP Financial
as a
. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
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 189.2% when compared to the same quarter one year ago, falling from $7.67 million to -$6.84 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 Capital Markets industry and the overall market, KCAP FINANCIAL INC'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 34.45%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 190.00% 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.
- KCAP FINANCIAL INC 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. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, KCAP FINANCIAL INC swung to a loss, reporting -$0.51 versus $0.43 in the prior year. This year, the market expects an improvement in earnings ($0.54 versus -$0.51).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 23.7%. Since the same quarter one year prior, revenues fell by 22.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full KCAP Financial Ratings Report.
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Dividend Yield: 7.20%
(NYSE:
) shares currently have a dividend yield of 7.20%.
City Office REIT, Inc is an equity real estate investment trust. The fund invests in the real estate markets of the United States. It acquires, own and operate high-quality office properties. City Office REIT, Inc was formed in November 26, 2013 and is domiciled in the United States.
The average volume for City Office REIT has been 155,300 shares per day over the past 30 days. City Office REIT has a market cap of $275.7 million and is part of the real estate industry. Shares are up 6.7% year-to-date as of the close of trading on Thursday.
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TheStreet Ratings rates
City Office REIT
as a
. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins and feeble growth in its earnings per share.
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 858.1% when compared to the same quarter one year ago, falling from -$0.74 million to -$7.12 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 Real Estate Investment Trusts (REITs) industry and the overall market, CITY OFFICE REIT INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for CITY OFFICE REIT INC is rather low; currently it is at 21.24%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -43.74% is significantly below that of the industry average.
- CITY OFFICE REIT INC 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CITY OFFICE REIT INC continued to lose money by earning -$0.53 versus -$0.60 in the prior year. For the next year, the market is expecting a contraction of 30.2% in earnings (-$0.69 versus -$0.53).
- After a year of stock price fluctuations, the net result is that CIO's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
- You can view the full City Office REIT Ratings Report.
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Other helpful dividend tools from TheStreet:
- Our dividend calendar.