4 Sell-Rated Dividend Stocks: AMTG, MTGE, RNF, ECA

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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 and 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 4 stocks with substantial yields, that ultimately, we have rated "Sell."

Apollo Residential Mortgage

Dividend Yield: 13.10%

Apollo Residential Mortgage (NYSE: AMTG) shares currently have a dividend yield of 13.10%.

Apollo Residential Mortgage, Inc. operates as a residential real estate trust that invests in, finances, and manages residential mortgage assets in the United States. Its investment portfolio includes agency and non-agency residential mortgage-backed securities. The company has a P/E ratio of 3.29.

The average volume for Apollo Residential Mortgage has been 623,000 shares per day over the past 30 days. Apollo Residential Mortgage has a market cap of $683.0 million and is part of the real estate industry. Shares are up 7.1% year to date as of the close of trading on Friday.

TheStreet Ratings rates Apollo Residential Mortgage as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share and unimpressive growth in net income.

Highlights from the ratings report include:
  • APOLLO RESIDENTIAL MTG INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. For the next year, the market is expecting a contraction of 66.4% in earnings ($2.75 versus $8.19).
  • 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 73.5% when compared to the same quarter one year ago, falling from $20.12 million to $5.34 million.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in 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.
  • The gross profit margin for APOLLO RESIDENTIAL MTG INC is currently very high, coming in at 85.30%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, AMTG's net profit margin of 13.95% significantly trails the industry average.

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American Capital Mortgage Investment

Dividend Yield: 15.20%

American Capital Mortgage Investment (NASDAQ: MTGE) shares currently have a dividend yield of 15.20%.

American Capital Mortgage Investment Corp. operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 3.64.

The average volume for American Capital Mortgage Investment has been 1,361,900 shares per day over the past 30 days. American Capital Mortgage Investment has a market cap of $1.4 billion and is part of the real estate industry. Shares are up 0.8% year to date as of the close of trading on Friday.

TheStreet Ratings rates American Capital Mortgage Investment as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income 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 224.6% when compared to the same quarter one year ago, falling from $21.32 million to -$26.57 million.
  • AMERICAN CAPITAL MTG INV CP has exprienced 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, AMERICAN CAPITAL MTG INV CP increased its bottom line by earning $8.40 versus $1.72 in the prior year. For the next year, the market is expecting a contraction of 61.3% in earnings ($3.25 versus $8.40).
  • In its most recent trading session, MTGE 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 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.
  • MTGE, with its very weak revenue results, has greatly underperformed against the industry average of 12.0%. Since the same quarter one year prior, revenues plummeted by 54.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for AMERICAN CAPITAL MTG INV CP is rather high; currently it is at 53.20%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, MTGE's net profit margin of -199.79% significantly underperformed when compared to the industry average.

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Rentech Nitrogen Partners

Dividend Yield: 6.10%

Rentech Nitrogen Partners (NYSE: RNF) shares currently have a dividend yield of 6.10%.

Rentech Nitrogen Partners, L.P. engages in the manufacture and sale of nitrogen fertilizer products for use in the United States. The company operates in two segments, East Dubuque and Pasadena. The company has a P/E ratio of 12.47.

The average volume for Rentech Nitrogen Partners has been 406,300 shares per day over the past 30 days. Rentech Nitrogen Partners has a market cap of $1.3 billion and is part of the chemicals industry. Shares are down 12.5% year to date as of the close of trading on Friday.

TheStreet Ratings rates Rentech Nitrogen 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 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 Chemicals industry. The net income has decreased by 22.5% when compared to the same quarter one year ago, dropping from $19.37 million to $15.01 million.
  • The debt-to-equity ratio is very high at 2.16 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • RENTECH NITROGEN PARTNERS LP's earnings per share declined by 25.5% in the most recent quarter compared to 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, RENTECH NITROGEN PARTNERS LP increased its bottom line by earning $2.78 versus $0.36 in the prior year. For the next year, the market is expecting a contraction of 7.9% in earnings ($2.56 versus $2.78).
  • 42.60% is the gross profit margin for RENTECH NITROGEN PARTNERS LP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, RNF's net profit margin of 25.19% compares favorably to the industry average.
  • Compared to its closing price of one year ago, RNF's share price has jumped by 39.64%, exceeding the performance of the broader market during that same time frame. Despite the fact that the stock's value has already enjoyed nice gains in the past year, we feel that the risks surrounding an investment in this stock outweigh any potential future returns.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

Encana

Dividend Yield: 4.30%

Encana (NYSE: ECA) shares currently have a dividend yield of 4.30%.

Encana Corporation and its subsidiaries engage in the exploration for, development, production, and marketing of natural gas, oil, and natural gas liquids in Canada and the United States.

The average volume for Encana has been 4,790,600 shares per day over the past 30 days. Encana has a market cap of $13.6 billion and is part of the energy industry. Shares are down 4.4% year to date as of the close of trading on Friday.

TheStreet Ratings rates Encana 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, disappointing return on equity, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • ENCANA CORP has exprienced 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, ENCANA CORP swung to a loss, reporting -$3.79 versus $0.15 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 3691.7% when compared to the same quarter one year ago, falling from $12.00 million to -$431.00 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 Oil, Gas & Consumable Fuels industry and the overall market, ENCANA CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ENCANA CORP is currently lower than what is desirable, coming in at 33.40%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -40.69% is significantly below that of the industry average.
  • Net operating cash flow has decreased to $338.00 million or 45.21% 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.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

Other helpful dividend tools from TheStreet:

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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