3 Sell-Rated Dividend Stocks: ZFC, AMTG, OAKS

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."

ZAIS Financial

Dividend Yield: 9.90%

ZAIS Financial (NYSE: ZFC) shares currently have a dividend yield of 9.90%.

Zais Financial Corp. invests in, finances, and manages performing and re-performing residential mortgage loans. The company also invests in, finances, and manages residential mortgage-backed securities (RMBS) that are not issued or guaranteed by a federally chartered corporation. The company has a P/E ratio of 18.43.

The average volume for ZAIS Financial has been 40,600 shares per day over the past 30 days. ZAIS Financial has a market cap of $129.3 million and is part of the real estate industry. Shares are up 0.6% year-to-date as of the close of trading on Thursday.

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: 9.50%

Apollo Residential Mortgage (NYSE: AMTG) shares currently have a dividend yield of 9.50%.

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

The average volume for Apollo Residential Mortgage has been 268,800 shares per day over the past 30 days. Apollo Residential Mortgage has a market cap of $540.4 million and is part of the real estate industry. Shares are up 15.1% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Apollo Residential Mortgage as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • 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.
  • Net operating cash flow has decreased to $12.31 million or 35.62% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • In its most recent trading session, AMTG 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. 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.
  • AMTG, with its decline in revenue, underperformed when compared the industry average of 10.3%. Since the same quarter one year prior, revenues slightly dropped by 0.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • APOLLO RESIDENTIAL MTG INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth 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 ($2.12 versus -$1.91).

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

Five Oaks Investment

Dividend Yield: 12.30%

Five Oaks Investment (NYSE: OAKS) shares currently have a dividend yield of 12.30%.

Five Oaks Investment Corp. focuses on investing, financing, and managing agency and non-agency residential mortgage-backed securities (RMBS), residential mortgage loans, multi-family MBS, and other mortgage-related investments. It would elect to be taxed as a real estate investment trust.

The average volume for Five Oaks Investment has been 100,000 shares per day over the past 30 days. Five Oaks Investment has a market cap of $130.2 million and is part of the real estate industry. Shares are up 15.4% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Five Oaks Investment as a sell. Among the areas we feel are negative, one of the most important has been generally deteriorating net income.

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 266.3% when compared to the same quarter one year ago, falling from $1.53 million to -$2.54 million.
  • FIVE OAKS INVESTMENT 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. This year, the market expects an improvement in earnings ($0.79 versus $0.43).
  • The share price of FIVE OAKS INVESTMENT CORP has not done very well: it is down 10.08% 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.
  • Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, FIVE OAKS INVESTMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for FIVE OAKS INVESTMENT CORP is rather high; currently it is at 59.11%. 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 -65.02% 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.

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