What To Sell: 3 Sell-Rated Dividend Stocks LGP, LINC, 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."

Lehigh Gas Partners

Dividend Yield: 7.60%

Lehigh Gas Partners (NYSE: LGP) shares currently have a dividend yield of 7.60%.

Lehigh Gas Partners LP is engaged in the wholesale distribution of motor fuels to sub-wholesalers, independent dealers, lessee dealers, and others; and retail distribution of motor fuels to end customers at commission sites in the United States. The company has a P/E ratio of 26.81.

The average volume for Lehigh Gas Partners has been 46,200 shares per day over the past 30 days. Lehigh Gas Partners has a market cap of $300.1 million and is part of the energy industry. Shares are down 7.3% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Lehigh Gas Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk, poor profit margins 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 62.0% when compared to the same quarter one year ago, falling from $3.76 million to $1.43 million.
  • The debt-to-equity ratio is very high at 2.83 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, LGP maintains a poor quick ratio of 0.74, which illustrates the inability to avoid short-term cash problems.
  • The gross profit margin for LEHIGH GAS PARTNERS LP is currently extremely low, coming in at 3.00%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.29% trails that of the industry average.
  • LEHIGH GAS PARTNERS LP 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 company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, LEHIGH GAS PARTNERS LP increased its bottom line by earning $1.19 versus $0.23 in the prior year. For the next year, the market is expecting a contraction of 8.4% in earnings ($1.09 versus $1.19).
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.

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

Lincoln Educational Services

Dividend Yield: 7.10%

Lincoln Educational Services (NASDAQ: LINC) shares currently have a dividend yield of 7.10%.

Lincoln Educational Services Corporation, together with its subsidiaries, provides various career-oriented post-secondary education services in the United States.

The average volume for Lincoln Educational Services has been 220,200 shares per day over the past 30 days. Lincoln Educational Services has a market cap of $95.0 million and is part of the diversified services industry. Shares are down 20.5% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Lincoln Educational Services 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 high debt management risk 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 Diversified Consumer Services industry. The net income has significantly decreased by 48.2% when compared to the same quarter one year ago, falling from -$7.49 million to -$11.09 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 Diversified Consumer Services industry and the overall market, LINCOLN EDUCATIONAL SERVICES'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 -$8.38 million or 98.62% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite currently having a low debt-to-equity ratio of 0.30, 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 0.46 is very low and demonstrates very weak liquidity.
  • The share price of LINCOLN EDUCATIONAL SERVICES has not done very well: it is down 22.02% 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.

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: 7.80%

Student Transportation (NASDAQ: STB) shares currently have a dividend yield of 7.80%.

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 165.50.

The average volume for Student Transportation has been 90,500 shares per day over the past 30 days. Student Transportation has a market cap of $545.9 million and is part of the transportation industry. Shares are up 7% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Student Transportation as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins, weak operating cash flow and generally high debt management risk.

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 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 rather low; currently it is at 23.71%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.88% significantly trails the industry average.
  • Net operating cash flow has decreased to $11.81 million or 13.84% 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.
  • Currently the debt-to-equity ratio of 1.74 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 1.08, demonstrating the ability to handle short-term liquidity needs.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.

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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