What To Sell: 3 Sell-Rated Dividend Stocks ARP, AMTG, WMC

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."

Atlas Resource Partners

Dividend Yield: 10.70%

Atlas Resource Partners (NYSE: ARP) shares currently have a dividend yield of 10.70%.

Atlas Resource Partners, L.P. engages in the production of natural gas, crude oil, and natural gas liquids in basins across the United States. The company operates through three segments: Gas and Oil Production, Well Construction and Completion, and Other Partnership Management.

The average volume for Atlas Resource Partners has been 360,100 shares per day over the past 30 days. Atlas Resource Partners has a market cap of $1.3 billion and is part of the energy industry. Shares are up 5.8% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Atlas Resource Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally high debt management risk, 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 111.5% when compared to the same quarter one year ago, falling from -$18.91 million to -$40.00 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ATLAS RESOURCE PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • ARP's debt-to-equity ratio of 0.88 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 0.44 is very low and demonstrates very weak liquidity.
  • The share price of ATLAS RESOURCE PARTNERS LP has not done very well: it is down 8.50% 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. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • ATLAS RESOURCE PARTNERS LP's earnings per share declined by 45.3% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ATLAS RESOURCE PARTNERS LP reported poor results of -$1.88 versus -$1.63 in the prior year. This year, the market expects an improvement in earnings (-$0.05 versus -$1.88).

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

Apollo Residential Mortgage

Dividend Yield: 9.20%

Apollo Residential Mortgage (NYSE: AMTG) shares currently have a dividend yield of 9.20%.

Apollo Residential Mortgage, Inc. primarily invests in residential mortgage assets in the United States.

The average volume for Apollo Residential Mortgage has been 360,600 shares per day over the past 30 days. Apollo Residential Mortgage has a market cap of $558.8 million and is part of the real estate industry. Shares are up 17.5% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Apollo Residential Mortgage as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 84.7% when compared to the same quarter one year ago, falling from $55.84 million to $8.53 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 Real Estate Investment Trusts (REITs) industry and the overall market, APOLLO RESIDENTIAL MTG INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The share price of APOLLO RESIDENTIAL MTG INC has not done very well: it is down 23.69% 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. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • APOLLO RESIDENTIAL MTG 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. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, APOLLO RESIDENTIAL MTG INC swung to a loss, reporting -$1.91 versus $8.19 in the prior year. This year, the market expects an improvement in earnings ($2.07 versus -$1.91).
  • The gross profit margin for APOLLO RESIDENTIAL MTG INC is currently very high, coming in at 85.13%. Regardless of AMTG'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 20.94% trails 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.

Western Asset Mortgage Capital

Dividend Yield: 19.40%

Western Asset Mortgage Capital (NYSE: WMC) shares currently have a dividend yield of 19.40%.

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 620,600 shares per day over the past 30 days. Western Asset Mortgage Capital has a market cap of $400.3 million and is part of the real estate industry. Shares are up 11.4% year-to-date as of the close of trading on Monday.

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 16.5% in earnings ($3.14 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 6.3%. 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 23.85% 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.

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