3 Sell-Rated Dividend Stocks: DCIX, WMC, AT

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

Diana Containerships

Dividend Yield: 15.20%

Diana Containerships (NASDAQ: DCIX) shares currently have a dividend yield of 15.20%.

Diana Containerships Inc., a shipping company, owns and operates containerships. It is involved in the seaborne transportation activities. As of August 23, 2013, its fleet consisted of nine container vessels comprising one Post-Panamax and eight Panamax vessels.

The average volume for Diana Containerships has been 247,000 shares per day over the past 30 days. Diana Containerships has a market cap of $134.6 million and is part of the transportation industry. Shares are down 34.4% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Diana Containerships as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, 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 Marine industry. The net income has significantly decreased by 145.1% when compared to the same quarter one year ago, falling from $1.59 million to -$0.72 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 Marine industry and the overall market, DIANA CONTAINERSHIPS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $6.47 million or 29.12% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 37.31%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 140.00% compared to the year-earlier quarter. 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.
  • DIANA CONTAINERSHIPS 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, DIANA CONTAINERSHIPS INC increased its bottom line by earning $0.24 versus $0.16 in the prior year. For the next year, the market is expecting a contraction of 104.2% in earnings (-$0.01 versus $0.24).

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

Western Asset Mortgage Capital

Dividend Yield: 18.60%

Western Asset Mortgage Capital (NYSE: WMC) shares currently have a dividend yield of 18.60%.

Western Asset Mortgage Capital Corporation operates as a real estate investment trust (REIT) in the United States. It primarily engages in investing in, financing, and managing agency residential mortgage-backed securities.

The average volume for Western Asset Mortgage Capital has been 597,500 shares per day over the past 30 days. Western Asset Mortgage Capital has a market cap of $418.5 million and is part of the real estate industry. Shares are down 12.9% year-to-date as of the close of trading on Tuesday.

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

Highlights from the ratings report include:
  • WESTERN ASSET MTG CAPITAL CP 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. For the next year, the market is expecting a contraction of 8.4% in earnings ($3.45 versus $3.76).
  • 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 73.2% when compared to the same quarter one year ago, falling from $28.19 million to $7.54 million.
  • WMC, with its very weak revenue results, has greatly underperformed against the industry average of 9.6%. Since the same quarter one year prior, revenues plummeted by 57.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, WESTERN ASSET MTG CAPITAL CP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The share price of WESTERN ASSET MTG CAPITAL CP has not done very well: it is down 20.72% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter.

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

Atlantic Power Corporation

Dividend Yield: 11.50%

Atlantic Power Corporation (NYSE: AT) shares currently have a dividend yield of 11.50%.

Atlantic Power Corporation operates as a power generation and infrastructure company with a portfolio of assets in the United States and Canada.

The average volume for Atlantic Power Corporation has been 1,309,600 shares per day over the past 30 days. Atlantic Power Corporation has a market cap of $392.5 million and is part of the utilities industry. Shares are down 71.4% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Atlantic Power Corporation 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 and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • ATLANTIC POWER 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 suffered a declining pattern earnings per share over the past two years. During the past fiscal year, ATLANTIC POWER CORP reported poor results of -$1.10 versus -$0.39 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 Independent Power Producers & Energy Traders industry. The net income has significantly decreased by 452.0% when compared to the same quarter one year ago, falling from -$7.50 million to -$41.40 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 72.37%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 54.54% 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.
  • The debt-to-equity ratio is very high at 3.02 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, AT's quick ratio is somewhat strong at 1.05, demonstrating the ability to handle short-term liquidity needs.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Independent Power Producers & Energy Traders industry and the overall market, ATLANTIC POWER CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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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