What To Sell: 3 Sell-Rated Dividend Stocks SPKE, BONT, CNNX - TheStreet

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."

Spark Energy

Dividend Yield: 7.90%

Spark Energy

(NASDAQ:

SPKE

) shares currently have a dividend yield of 7.90%.

Spark Energy, Inc., through its subsidiaries, operates as an independent retail energy services company in the United States. It operates through two segments, Retail Natural Gas and Retail Electricity. The company has a P/E ratio of 25.38.

The average volume for Spark Energy has been 26,700 shares per day over the past 30 days. Spark Energy has a market cap of $56.6 million and is part of the utilities industry. Shares are up 33.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Spark Energy

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and poor profit margins.

Highlights from the ratings report include:

  • The debt-to-equity ratio is very high at 4.52 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, SPKE maintains a poor quick ratio of 0.74, which illustrates the inability to avoid short-term cash problems.
  • The gross profit margin for SPARK ENERGY INC is rather low; currently it is at 16.22%. Regardless of SPKE's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SPKE's net profit margin of 1.43% is significantly lower than the industry average.
  • Looking at where the stock is today compared to one year ago, we find that it is higher, and it has outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • SPARK ENERGY INC's earnings per share declined by 11.4% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.55 versus -$2.19).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Electric Utilities industry average. The net income increased by 23.8% when compared to the same quarter one year prior, going from $1.06 million to $1.31 million.

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Bon-Ton Stores

Dividend Yield: 14.30%

Bon-Ton Stores

(NASDAQ:

BONT

) shares currently have a dividend yield of 14.30%.

The Bon-Ton Stores, Inc., through its subsidiaries, operates department stores in the United States. The company's stores offer brand-name fashion apparel and accessories for women, men, and children, as well as cosmetics, home furnishings, and other goods.

The average volume for Bon-Ton Stores has been 233,900 shares per day over the past 30 days. Bon-Ton Stores has a market cap of $25.2 million and is part of the retail industry. Shares are down 83.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Bon-Ton Stores

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 generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • The debt-to-equity ratio is very high at 62.97 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.11, which clearly demonstrates the inability to cover short-term cash 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 Multiline Retail industry and the overall market, BON-TON STORES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • BON-TON STORES INC's earnings per share declined by 8.1% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, BON-TON STORES INC reported poor results of -$0.51 versus -$0.37 in the prior year. For the next year, the market is expecting a contraction of 64.7% in earnings (-$0.84 versus -$0.51).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Multiline Retail industry average, but is greater than that of the S&P 500. The net income has decreased by 9.3% when compared to the same quarter one year ago, dropping from -$36.19 million to -$39.56 million.
  • Looking at the price performance of BONT's shares over the past 12 months, there is not much good news to report: the stock is down 86.41%, 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.

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CONE Midstream Partners

Dividend Yield: 7.70%

CONE Midstream Partners

(NYSE:

CNNX

) shares currently have a dividend yield of 7.70%.

CONE Midstream Partners LP acquires, owns, operates, and develops natural gas gathering and other midstream energy assets in the Marcellus Shale in Pennsylvania and West Virginia. The company was founded in 2014 and is based in Canonsburg, Pennsylvania. The company has a P/E ratio of 10.94.

The average volume for CONE Midstream Partners has been 158,400 shares per day over the past 30 days. CONE Midstream Partners has a market cap of $344.7 million and is part of the energy industry. Shares are down 51% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

CONE Midstream Partners

as a

sell

. The area that we feel has been the company's primary weakness has been its generally higher debt management risk.

Highlights from the ratings report include:

  • CNNX's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.40 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The gross profit margin for CONE MIDSTREAM PARTNERS LP is rather high; currently it is at 69.84%. It has increased significantly from the same period last year. Along with this, the net profit margin of 36.57% significantly outperformed against the industry average.
  • This stock's share value has moved by only 60.49% over the past year.
  • CONE MIDSTREAM PARTNERS LP has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. This year, the market expects an improvement in earnings ($1.12 versus $0.26).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 2.2% when compared to the same quarter one year prior, going from $19.24 million to $19.66 million.

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