What To Sell: 3 Sell-Rated Dividend Stocks USAC, GOOD, STB

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."

USA Compression Partners

Dividend Yield: 7.10%

USA Compression Partners (NYSE: USAC) shares currently have a dividend yield of 7.10%.

USA Compression Partners, LP provides natural gas compression services under term contracts with customers in the oil and gas industry in the United States. The company has a P/E ratio of 84.41.

The average volume for USA Compression Partners has been 29,200 shares per day over the past 30 days. USA Compression Partners has a market cap of $648.0 million and is part of the energy industry. Shares are up 1.2% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates USA Compression Partners as a sell. Among the areas we feel are negative, one of the most important has been very high debt management risk by most measures.

Highlights from the ratings report include:
  • Despite currently having a low debt-to-equity ratio of 0.59, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.36 is very low and demonstrates very weak liquidity.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Energy Equipment & Services industry and the overall market, USA COMPRESSION PRTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for USA COMPRESSION PRTNRS LP is rather high; currently it is at 67.88%. Regardless of USAC'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 9.12% trails the industry average.
  • Net operating cash flow has significantly increased by 128.57% to $26.51 million when compared to the same quarter last year. In addition, USA COMPRESSION PRTNRS LP has also vastly surpassed the industry average cash flow growth rate of 23.27%.
  • USA COMPRESSION PRTNRS 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, USA COMPRESSION PRTNRS LP increased its bottom line by earning $0.32 versus $0.15 in the prior year. This year, the market expects an improvement in earnings ($0.57 versus $0.32).

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

Gladstone Commercial Corporation

Dividend Yield: 8.60%

Gladstone Commercial Corporation (NASDAQ: GOOD) shares currently have a dividend yield of 8.60%.

Gladstone Commercial Corporation operates as a real estate investment trust (REIT) in the United States. It engages in investing in and owning net leased industrial and commercial real properties, and making long-term industrial and commercial mortgage loans.

The average volume for Gladstone Commercial Corporation has been 78,200 shares per day over the past 30 days. Gladstone Commercial Corporation has a market cap of $274.7 million and is part of the real estate industry. Shares are down 3.4% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Gladstone Commercial Corporation 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 45.8% when compared to the same quarter one year ago, falling from $0.61 million to $0.33 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 Real Estate Investment Trusts (REITs) industry and the overall market, GLADSTONE COMMERCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has declined marginally to $4.31 million or 9.67% 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.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, GOOD has underperformed the S&P 500 Index, declining 13.85% from its price level of one year ago. 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.
  • GLADSTONE COMMERCIAL CORP's earnings per share declined by 25.0% 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 two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GLADSTONE COMMERCIAL CORP reported poor results of -$0.22 versus -$0.05 in the prior year. This year, the market expects an improvement in earnings (-$0.16 versus -$0.22).

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

Student Transportation

Dividend Yield: 8.20%

Student Transportation (NASDAQ: STB) shares currently have a dividend yield of 8.20%.

Student Transportation Inc. provides school bus transportation services in North America. The company operates through two segments Transportation, and Oil and Gas. The Transportation segment provides school bus management services to public and private schools in North America. The company has a P/E ratio of 158.25.

The average volume for Student Transportation has been 130,500 shares per day over the past 30 days. Student Transportation has a market cap of $505.7 million and is part of the diversified services industry. Shares are down 0.5% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Student Transportation as a sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, deteriorating net income, disappointing return on equity, poor profit margins and generally high debt management risk.

Highlights from the ratings report include:
  • In its most recent trading session, STB 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. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Road & Rail industry. The net income has decreased by 2.6% when compared to the same quarter one year ago, dropping from $2.98 million to $2.90 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 Road & Rail industry and the overall market, STUDENT TRANSPORTATION INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for STUDENT TRANSPORTATION INC is currently lower than what is desirable, coming in at 25.07%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.14% significantly trails the industry average.
  • Currently the debt-to-equity ratio of 1.60 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, STB's quick ratio is somewhat strong at 1.13, demonstrating the ability to handle short-term liquidity needs.

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

Other helpful dividend tools from TheStreet:
null

If you liked this article you might like

Investing Tips Gleaned From Private Equity 13F Filings

Investing Tips Gleaned From Private Equity 13F Filings

Stealing More Investing Ideas From Private Equity 13F Filings

Stealing More Investing Ideas From Private Equity 13F Filings

What To Sell: 3 Sell-Rated Dividend Stocks USAC, KRO, DX

What To Sell: 3 Sell-Rated Dividend Stocks USAC, KRO, DX

What To Sell: 3 Sell-Rated Dividend Stocks USAC, STON, JCS

What To Sell: 3 Sell-Rated Dividend Stocks USAC, STON, JCS

3 Sell-Rated Dividend Stocks: USAC, WMLP, ELLO

3 Sell-Rated Dividend Stocks: USAC, WMLP, ELLO