What To Sell: 3 Sell-Rated Dividend Stocks ARR, CG, CLI

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."

ARMOUR Residential REIT

Dividend Yield: 14.40%

ARMOUR Residential REIT (NYSE: ARR) shares currently have a dividend yield of 14.40%.

ARMOUR Residential REIT, Inc. is a real estate investment trust launched and managed by ARMOUR Residential Management LLC. It invests in the real estate markets of the United States.

The average volume for ARMOUR Residential REIT has been 4,637,100 shares per day over the past 30 days. ARMOUR Residential REIT has a market cap of $1.5 billion and is part of the real estate industry. Shares are up 4% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates ARMOUR Residential REIT 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 567.2% when compared to the same quarter one year ago, falling from $115.75 million to -$540.78 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, ARMOUR RESIDENTIAL REIT INC'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 $70.22 million or 53.16% 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 34.60%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 497.29% 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.
  • ARMOUR RESIDENTIAL REIT 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 two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ARMOUR RESIDENTIAL REIT INC swung to a loss, reporting -$0.53 versus $0.97 in the prior year. This year, the market expects an improvement in earnings ($0.60 versus -$0.53).

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

Carlyle Group L P

Dividend Yield: 15.80%

Carlyle Group L P (NASDAQ: CG) shares currently have a dividend yield of 15.80%.

The Carlyle Group LP is an investment firm specializing in direct and fund of fund investments. The company has a P/E ratio of 16.63.

The average volume for Carlyle Group L P has been 639,100 shares per day over the past 30 days. Carlyle Group L P has a market cap of $1.8 billion and is part of the financial services industry. Shares are down 1.6% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Carlyle Group L P as a sell. The area that we feel has been the company's primary weakness has been its poor profit margins.

Highlights from the ratings report include:
  • 45.14% is the gross profit margin for CARLYLE GROUP LP which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, CG's net profit margin of 4.35% significantly trails the industry average.
  • Net operating cash flow has significantly increased by 1931.38% to $437.70 million when compared to the same quarter last year. In addition, CARLYLE GROUP LP has also vastly surpassed the industry average cash flow growth rate of 119.00%.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Capital Markets industry and the overall market, CARLYLE GROUP LP's return on equity exceeds that of both the industry average and the S&P 500.
  • 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.
  • CARLYLE GROUP LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CARLYLE GROUP LP increased its bottom line by earning $1.80 versus $0.31 in the prior year. This year, the market expects an improvement in earnings ($3.14 versus $1.80).

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

Mack-Cali Realty

Dividend Yield: 5.90%

Mack-Cali Realty (NYSE: CLI) shares currently have a dividend yield of 5.90%.

Mack-Cali Realty Corporation is a real estate investment trust (REIT). It engages in the leasing, management, acquisition, development, and construction of commercial real estate properties in the United States.

The average volume for Mack-Cali Realty has been 1,206,800 shares per day over the past 30 days. Mack-Cali Realty has a market cap of $1.8 billion and is part of the real estate industry. Shares are down 3.2% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Mack-Cali Realty 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 487.2% when compared to the same quarter one year ago, falling from -$9.23 million to -$54.18 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 other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, MACK-CALI REALTY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $55.77 million or 22.14% 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.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 26.46%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 6100.00% 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.
  • MACK-CALI REALTY 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. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, MACK-CALI REALTY CORP swung to a loss, reporting -$0.88 versus $0.38 in the prior year. This year, the market expects an improvement in earnings ($0.03 versus -$0.88).

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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