3 Sell-Rated Dividend Stocks: CYS, CG, AHT

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."

CYS Investments

Dividend Yield: 14.80%

CYS Investments (NYSE: CYS) shares currently have a dividend yield of 14.80%.

CYS Investments, Inc., a specialty finance company, makes leveraged investments in whole-pool residential mortgage pass-through securities where the principal and interest payments are guaranteed.

The average volume for CYS Investments has been 2,912,900 shares per day over the past 30 days. CYS Investments has a market cap of $1.4 billion and is part of the real estate industry. Shares are up 16.5% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates CYS Investments 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 130.0% when compared to the same quarter one year ago, falling from -$39.94 million to -$91.86 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, CYS INVESTMENTS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.30%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 145.83% 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.
  • CYS INVESTMENTS 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, CYS INVESTMENTS INC swung to a loss, reporting -$2.87 versus $2.75 in the prior year. This year, the market expects an improvement in earnings ($1.42 versus -$2.87).
  • The gross profit margin for CYS INVESTMENTS INC is currently very high, coming in at 95.41%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -100.13% is in-line with 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.

Carlyle Group L P

Dividend Yield: 16.20%

Carlyle Group L P (NASDAQ: CG) shares currently have a dividend yield of 16.20%.

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 754,600 shares per day over the past 30 days. Carlyle Group L P has a market cap of $1.7 billion and is part of the financial services industry. Shares are down 2.6% year-to-date as of the close of trading on Thursday.

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 relatively poor performance when compared with the S&P 500 during the past year.

Highlights from the ratings report include:
  • In its most recent trading session, CG 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. 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.
  • 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 130.08%.
  • 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.
  • 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 ($3.30 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.

Ashford Hospitality

Dividend Yield: 4.60%

Ashford Hospitality (NYSE: AHT) shares currently have a dividend yield of 4.60%.

Ashford Hospitality Trust, Inc. is a publicly owned real estate investment trust. The firm engages in investment and management of properties in the hospitality industry. It invests in the real estate markets of the United States.

The average volume for Ashford Hospitality has been 959,800 shares per day over the past 30 days. Ashford Hospitality has a market cap of $914.5 million and is part of the real estate industry. Shares are up 25% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Ashford Hospitality as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.

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 37.8% when compared to the same quarter one year ago, falling from -$12.60 million to -$17.37 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, ASHFORD HOSPITALITY TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ASHFORD HOSPITALITY TRUST is currently extremely low, coming in at 6.67%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -8.64% is significantly below that of the industry average.
  • AHT has underperformed the S&P 500 Index, declining 15.40% 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.
  • AHT, with its decline in revenue, underperformed when compared the industry average of 6.7%. Since the same quarter one year prior, revenues fell by 15.4%. The declining revenue has not hurt the company's bottom line, with increasing 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.

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