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

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."

Life Partners Holdings

Dividend Yield: 10.60%

Life Partners Holdings (NASDAQ: LPHI) shares currently have a dividend yield of 10.60%.

Life Partners Holdings, Inc., through its subsidiary, Life Partners, Inc., operates in the secondary market for life insurance worldwide. It facilitates the sale of life settlements between sellers and purchasers, but does not take possession or control of the policies.

The average volume for Life Partners Holdings has been 19,700 shares per day over the past 30 days. Life Partners Holdings has a market cap of $35.1 million and is part of the insurance industry. Shares are up 5.6% 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 Life Partners Holdings as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity 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 Financial Services industry. The net income has significantly decreased by 203.4% when compared to the same quarter one year ago, falling from $1.68 million to -$1.74 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 Financial Services industry and the overall market, LIFE PARTNERS HOLDINGS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The share price of LIFE PARTNERS HOLDINGS INC has not done very well: it is down 17.79% 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.
  • LIFE PARTNERS HOLDINGS 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. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, LIFE PARTNERS HOLDINGS INC continued to lose money by earning -$0.13 versus -$0.16 in the prior year.
  • Net operating cash flow has significantly increased by 61.65% to -$1.10 million when compared to the same quarter last year. In addition, LIFE PARTNERS HOLDINGS INC has also vastly surpassed the industry average cash flow growth rate of 0.71%.

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

Ellington Residential Mortgage REIT

Dividend Yield: 12.60%

Ellington Residential Mortgage REIT (NYSE: EARN) shares currently have a dividend yield of 12.60%.

No company description available. The company has a P/E ratio of 5.17.

The average volume for Ellington Residential Mortgage REIT has been 61,900 shares per day over the past 30 days. Ellington Residential Mortgage REIT has a market cap of $160.1 million and is part of the real estate industry. Shares are up 13.9% 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 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.

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

JAVELIN Mortgage Investment

Dividend Yield: 13.60%

JAVELIN Mortgage Investment (NYSE: JMI) shares currently have a dividend yield of 13.60%.

No company description available.

The average volume for JAVELIN Mortgage Investment has been 181,400 shares per day over the past 30 days. JAVELIN Mortgage Investment has a market cap of $159.1 million and is part of the real estate industry. Shares are down 4.8% 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 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 12 months ago, the stock is up, but it has so far lagged the appreciation in 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.

Other helpful dividend tools from TheStreet:
null

If you liked this article you might like

16 Risky Micro-Cap Stocks to Avoid Despite Their Tasty Dividends

16 Risky Micro-Cap Stocks to Avoid Despite Their Tasty Dividends

3 Stocks Pushing The Insurance Industry Lower

3 Stocks Pushing The Insurance Industry Lower

3 Stocks Pushing The Insurance Industry Lower

3 Stocks Pushing The Insurance Industry Lower

3 Stocks Pushing The Insurance Industry Lower

3 Stocks Pushing The Insurance Industry Lower

What To Sell: 3 Sell-Rated Dividend Stocks ZFC, LPHI, OAKS

What To Sell: 3 Sell-Rated Dividend Stocks ZFC, LPHI, OAKS