Sell-Rated Dividend Stocks: Top 4 Companies: APTS, AMID, ACRE, TAC

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 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."

Preferred Apartment Communities

Dividend Yield: 8.20%

Preferred Apartment Communities (AMEX: APTS) shares currently have a dividend yield of 8.20%.

Preferred Apartment Communities, Inc. is a real estate investment trust launched and managed by Preferred Apartment Advisors, LLC. The fund invests in real estate markets of the United States. It primarily acquires and operates multifamily apartment properties.

The average volume for Preferred Apartment Communities has been 58,400 shares per day over the past 30 days. Preferred Apartment Communities has a market cap of $117.1 million 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 Preferred Apartment Communities as a sell. Among the areas we feel are negative, one of the most important has been the company's poor growth in earnings per share.

Highlights from the ratings report include:
  • PREFERRED APARTMENT CMNTYS's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. 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, PREFERRED APARTMENT CMNTYS continued to lose money by earning -$0.11 versus -$1.67 in the prior year. For the next year, the market is expecting a contraction of 1050.0% in earnings (-$1.27 versus -$0.11).
  • The net income has significantly decreased by 34.2% when compared to the same quarter one year ago, falling from $0.15 million to $0.10 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company.
  • Compared to where it was trading one year ago, APTS is down 2.49% to its most recent closing price of 7.85. Looking ahead, our view is that this stock still does not have good upside potential and may even suffer further declines.
  • The gross profit margin for PREFERRED APARTMENT CMNTYS is rather high; currently it is at 61.13%. It has increased from the same quarter the previous year.

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

American Midstream Partners

Dividend Yield: 7.60%

American Midstream Partners (NYSE: AMID) shares currently have a dividend yield of 7.60%.

American Midstream Partners, LP engages in gathering, treating, processing, and transporting natural gas in the Gulf Coast and Southeast regions of the United States.

The average volume for American Midstream Partners has been 17,500 shares per day over the past 30 days. American Midstream Partners has a market cap of $112.7 million and is part of the utilities industry. Shares are up 76% year to date as of the close of trading on Friday.

TheStreet Ratings rates American Midstream Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow, generally high debt management risk, poor profit margins and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • 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, AMERICAN MIDSTREAM PRTNRS LP'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 $1.16 million or 78.98% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • AMID's debt-to-equity ratio of 0.96 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.18 is very low and demonstrates very weak liquidity.
  • The gross profit margin for AMERICAN MIDSTREAM PRTNRS LP is currently extremely low, coming in at 7.93%. Regardless of AMID's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -3.35% trails the industry average.
  • AMERICAN MIDSTREAM PRTNRS LP 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, AMERICAN MIDSTREAM PRTNRS LP continued to lose money by earning -$0.71 versus -$1.24 in the prior year. For the next year, the market is expecting a contraction of 778.9% in earnings (-$6.24 versus -$0.71).

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

Ares Commercial Real Estate

Dividend Yield: 7.60%

Ares Commercial Real Estate (NYSE: ACRE) shares currently have a dividend yield of 7.60%.

Ares Commercial Real Estate Corporation, a specialty finance company, operates as a real estate investment trust (REIT). It originates, invests in, and manages middle-market commercial real estate (CRE) loans and other commercial real estate investments. The company has a P/E ratio of 14.62.

The average volume for Ares Commercial Real Estate has been 311,100 shares per day over the past 30 days. Ares Commercial Real Estate has a market cap of $374.8 million and is part of the real estate industry. Shares are down 19.1% year to date as of the close of trading on Friday.

TheStreet Ratings rates Ares Commercial Real Estate as a sell. The area that we feel has been the company's primary weakness has been its generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • Compared to where it was trading one year ago, ACRE is down 17.13% to its most recent closing price of 13.16. Looking ahead, our view is that this stock still does not have good upside potential and may even suffer further declines.
  • ARES COMMERCIAL REAL ESTATE 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 ($0.85 versus $0.10).
  • 43.68% is the gross profit margin for ARES COMMERCIAL REAL ESTATE which we consider to be strong. It has increased significantly from the same period last year.
  • The net income increased by 1477.6% when compared to the same quarter one year prior, rising from -$0.55 million to $7.63 million.
  • Since the same quarter one year prior, revenues leaped by 697.9%. Growth in the company's revenue appears to have helped boost the earnings per share.

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

TransAlta Corporation

Dividend Yield: 8.00%

TransAlta Corporation (NYSE: TAC) shares currently have a dividend yield of 8.00%.

TransAlta Corporation operates as a non-regulated electricity generation and energy marketing company in Canada, the United States, and Australia. The company engages in the generation and wholesale trade of electricity and other energy-related commodities and derivatives. The company has a P/E ratio of 63.23.

The average volume for TransAlta Corporation has been 105,900 shares per day over the past 30 days. TransAlta Corporation has a market cap of $3.7 billion and is part of the utilities industry. Shares are down 9.1% year to date as of the close of trading on Friday.

TheStreet Ratings rates TransAlta Corporation as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share and generally high debt management risk.

Highlights from the ratings report include:
  • TRANSALTA 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, TRANSALTA CORP swung to a loss, reporting -$2.72 versus $1.30 in the prior year.
  • Even though the current debt-to-equity ratio is 1.40, it is still below the industry average, suggesting that this level of debt is acceptable within the Independent Power Producers & Energy Traders industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.46 is very low and demonstrates very weak liquidity.
  • The net income has significantly decreased by 100.0% when compared to the same quarter one year ago, falling from $64.00 million to $0.00 million.
  • The gross profit margin for TRANSALTA CORP is rather high; currently it is at 57.14%. Regardless of TAC's high profit margin, it has managed to decrease from the same period last year.
  • Compared to where it was trading one year ago, TAC is down 6.46% to its most recent closing price of 13.91. Looking ahead, our view is that this stock still does not have good upside potential and may even suffer further declines.

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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