What To Sell: 3 Sell-Rated Dividend Stocks USAC, EARN, KNOP - TheStreet

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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."

USA Compression Partners

Dividend Yield: 8.20%

USA Compression Partners

(NYSE:

USAC

) shares currently have a dividend yield of 8.20%.

USA Compression Partners, LP provides natural gas compression services under term contracts with customers in the oil and gas industry in the United States. The company has a P/E ratio of 52.47.

The average volume for USA Compression Partners has been 122,800 shares per day over the past 30 days. USA Compression Partners has a market cap of $744.5 million and is part of the energy industry. Shares are down 7.4% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

USA Compression Partners

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and generally high debt management risk.

Highlights from the ratings report include:

  • In its most recent trading session, USAC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
  • Despite currently having a low debt-to-equity ratio of 0.53, 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 USAC's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.53 is low and demonstrates weak liquidity.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Energy Equipment & Services industry and the overall market, USA COMPRESSION PRTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for USA COMPRESSION PRTNRS LP is rather high; currently it is at 66.21%. Regardless of USAC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 14.11% trails the industry average.
  • Net operating cash flow has increased to $21.60 million or 33.75% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 17.80%.

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Ellington Residential Mortgage REIT

Dividend Yield: 12.30%

Ellington Residential Mortgage REIT

(NYSE:

EARN

) shares currently have a dividend yield of 12.30%.

No company description available. The company has a P/E ratio of 5.30.

The average volume for Ellington Residential Mortgage REIT has been 57,200 shares per day over the past 30 days. Ellington Residential Mortgage REIT has a market cap of $164.1 million and is part of the real estate industry. Shares are up 15.8% year-to-date as of the close of trading on Wednesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates

Ellington Residential Mortgage REIT

as a

sell

. The area that we feel has been the company's primary weakness has been its feeble growth in its earnings per share.

Highlights from the ratings report include:

  • Compared to where it was a year ago today, the stock is now trading at a higher level, and has traded in line with the S&P 500. Regardless of the rise in share value over the previous year, we feel that the risks involved in investing in this stock do not compensate for any future upside potential.
  • ELLINGTON RESIDENTIAL MTG reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($3.00 versus -$0.82).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 213.9% when compared to the same quarter one year prior, rising from -$9.70 million to $11.05 million.
  • Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ELLINGTON RESIDENTIAL MTG has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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KNOT Offshore Partners

Dividend Yield: 7.60%

KNOT Offshore Partners

(NYSE:

KNOP

) shares currently have a dividend yield of 7.60%.

KNOT Offshore Partners LP owns and operates shuttle tankers under long-term charters. The company provides crude oil loading, transportation, and storage services under time charters and bareboat charters. As of April 14, 2014, it had a fleet of five shuttle tankers. The company has a P/E ratio of 24.27.

The average volume for KNOT Offshore Partners has been 83,300 shares per day over the past 30 days. KNOT Offshore Partners has a market cap of $338.8 million and is part of the transportation industry. Shares are down 11.8% year-to-date as of the close of trading on Wednesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates

KNOT Offshore Partners

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, 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 37.1% when compared to the same quarter one year ago, falling from $3.97 million to $2.50 million.
  • The debt-to-equity ratio of 1.35 is relatively high when compared with the industry average, suggesting a need for better debt level management.
  • In its most recent trading session, KNOP has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • KNOT OFFSHORE PRTNRS LP's earnings per share declined by 39.1% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.37 versus $0.87).
  • The gross profit margin for KNOT OFFSHORE PRTNRS LP is currently very high, coming in at 80.45%. Regardless of KNOP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, KNOP's net profit margin of 11.29% compares favorably to the industry average.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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