What To Sell: 3 Sell-Rated Dividend Stocks FLY, DCIX, GOOD

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."

Fly Leasing

Dividend Yield: 7.10%

Fly Leasing (NYSE: FLY) shares currently have a dividend yield of 7.10%.

FLY Leasing Limited, together with its subsidiaries, is engaged in purchasing and leasing commercial aircraft under multi-year contracts to various airlines worldwide. As of April 8, 2014, it operated a fleet of 119 commercial jet aircrafts. The company has a P/E ratio of 56.24.

The average volume for Fly Leasing has been 167,400 shares per day over the past 30 days. Fly Leasing has a market cap of $582.0 million and is part of the diversified services industry. Shares are down 12.8% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Fly Leasing as a sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, feeble growth in its earnings per share, deteriorating net income, generally high debt management risk and disappointing return on equity.

Highlights from the ratings report include:
  • The share price of FLY LEASING LTD -ADR has not done very well: it is down 14.24% 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. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • FLY LEASING LTD -ADR 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. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, FLY LEASING LTD -ADR reported lower earnings of $1.67 versus $1.79 in the prior year. For the next year, the market is expecting a contraction of 40.1% in earnings ($1.00 versus $1.67).
  • 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 Trading Companies & Distributors industry. The net income has significantly decreased by 89.2% when compared to the same quarter one year ago, falling from $32.85 million to $3.56 million.
  • The debt-to-equity ratio is very high at 3.38 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • 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 Trading Companies & Distributors industry and the overall market, FLY LEASING LTD -ADR's return on equity significantly trails that of both the industry average and the S&P 500.

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

Diana Containerships

Dividend Yield: 7.90%

Diana Containerships (NASDAQ: DCIX) shares currently have a dividend yield of 7.90%.

Diana Containerships Inc. operates in the seaborne transportation industry. It owns and operates containerships. Its fleet consists of 6 panamax and 2 post-panamax containerships with a combined carrying capacity of 36,165 TEU. The company was founded in 2010 and is based in Athens, Greece.

The average volume for Diana Containerships has been 256,700 shares per day over the past 30 days. Diana Containerships has a market cap of $92.7 million and is part of the transportation industry. Shares are down 37.3% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Diana Containerships 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:
  • 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 Marine industry and the overall market, DIANA CONTAINERSHIPS 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 $5.54 million or 29.34% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • DCIX's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 50.58%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • DCIX, with its decline in revenue, underperformed when compared the industry average of 8.2%. Since the same quarter one year prior, revenues fell by 11.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • DCIX's debt-to-equity ratio of 0.91 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.

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

Dividend Yield: 8.60%

Gladstone Commercial (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 has been 98,400 shares per day over the past 30 days. Gladstone Commercial has a market cap of $279.8 million and is part of the real estate industry. Shares are down 3.6% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Gladstone Commercial as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • GLADSTONE COMMERCIAL 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. Earnings per share have declined over the last two years. We anticipate that this should continue 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. For the next year, the market is expecting a contraction of 340.9% in earnings (-$0.97 versus -$0.22).
  • 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 3221.0% when compared to the same quarter one year ago, falling from $0.43 million to -$13.51 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, GLADSTONE COMMERCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The share price of GLADSTONE COMMERCIAL CORP has not done very well: it is down 8.93% 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.
  • Net operating cash flow has significantly increased by 101.66% to $6.16 million when compared to the same quarter last year. In addition, GLADSTONE COMMERCIAL CORP has also vastly surpassed the industry average cash flow growth rate of 30.47%.

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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