3 Sell-Rated Dividend Stocks: EARN, JMI, ANH

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."

Ellington Residential Mortgage REIT

Dividend Yield: 12.70%

Ellington Residential Mortgage REIT (NYSE: EARN) shares currently have a dividend yield of 12.70%.

No company description available. The company has a P/E ratio of 5.10.

The average volume for Ellington Residential Mortgage REIT has been 63,100 shares per day over the past 30 days. Ellington Residential Mortgage REIT has a market cap of $158.0 million and is part of the real estate industry. Shares are up 12.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Ellington Residential Mortgage REIT as a sell. The area that we feel has been the company's primary weakness has been its feeble growth in its earnings per share.

Highlights from the ratings report include:
  • Compared to where it was a year ago today, the stock is now trading at a higher level, and has traded in line with the S&P 500. 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.
  • ELLINGTON RESIDENTIAL MTG reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($2.64 versus -$0.82).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 213.9% when compared to the same quarter one year prior, rising from -$9.70 million to $11.05 million.
  • Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ELLINGTON RESIDENTIAL MTG has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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JAVELIN Mortgage Investment

Dividend Yield: 13.50%

JAVELIN Mortgage Investment (NYSE: JMI) shares currently have a dividend yield of 13.50%.

No company description available.

The average volume for JAVELIN Mortgage Investment has been 186,600 shares per day over the past 30 days. JAVELIN Mortgage Investment has a market cap of $159.7 million and is part of the real estate industry. Shares are down 4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates JAVELIN Mortgage Investment as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income and weak operating cash flow.

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 123.0% when compared to the same quarter one year ago, falling from $38.24 million to -$8.78 million.
  • Net operating cash flow has significantly decreased to $2.46 million or 53.20% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • JAVELIN MORTGAGE INVESTMENT 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 ($1.75 versus -$1.96).
  • Compared to where it was a year ago, the stock is now trading at a higher level, and has traded in line with the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, JAVELIN MORTGAGE INVESTMENT'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.

Anworth Mortgage Asset

Dividend Yield: 10.80%

Anworth Mortgage Asset (NYSE: ANH) shares currently have a dividend yield of 10.80%.

Anworth Mortgage Asset Corporation operates as a real estate investment trust in the United States. The company primarily invests in the United States agency mortgage-backed securities, which are securities representing obligations guaranteed by the U.S. The company has a P/E ratio of 14.77.

The average volume for Anworth Mortgage Asset has been 867,800 shares per day over the past 30 days. Anworth Mortgage Asset has a market cap of $628.6 million and is part of the real estate industry. Shares are up 22.6% year-to-date as of the close of trading on Friday.

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

TheStreet Ratings rates Anworth Mortgage Asset 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 and disappointing return on equity.

Highlights from the ratings report include:
  • ANWORTH MTG ASSET 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, ANWORTH MTG ASSET CORP reported lower earnings of $0.49 versus $0.68 in the prior year. For the next year, the market is expecting a contraction of 30.6% in earnings ($0.34 versus $0.49).
  • 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 56.3% when compared to the same quarter one year ago, falling from $23.00 million to $10.05 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ANWORTH MTG ASSET CORP's return on equity is below that of both the industry average and the S&P 500.
  • ANH, 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 9.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The gross profit margin for ANWORTH MTG ASSET CORP is currently very high, coming in at 85.02%. Regardless of ANH'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 23.34% trails 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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