What To Sell: 3 Sell-Rated Dividend Stocks EARN, JMI, 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."

Ellington Residential Mortgage REIT

Dividend Yield: 12.90%

Ellington Residential Mortgage REIT (NYSE: EARN) shares currently have a dividend yield of 12.90%.

No company description available. The company has a P/E ratio of 5.02.

The average volume for Ellington Residential Mortgage REIT has been 60,500 shares per day over the past 30 days. Ellington Residential Mortgage REIT has a market cap of $155.6 million and is part of the real estate industry. Shares are up 12% 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 relatively poor performance when compared with the S&P 500 during the past year.

Highlights from the ratings report include:
  • 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. 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 ($3.00 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: 14.30%

JAVELIN Mortgage Investment (NYSE: JMI) shares currently have a dividend yield of 14.30%.

No company description available.

The average volume for JAVELIN Mortgage Investment has been 186,200 shares per day over the past 30 days. JAVELIN Mortgage Investment has a market cap of $151.4 million and is part of the real estate industry. Shares are down 8.4% 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, weak operating cash flow 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 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.
  • In its most recent trading session, JMI 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.
  • 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 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.

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 322.00.

The average volume for Student Transportation has been 75,700 shares per day over the past 30 days. Student Transportation has a market cap of $533.3 million and is part of the transportation industry. Shares are up 3.7% 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 Student Transportation 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, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • In its most recent trading session, STB 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. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
  • STUDENT TRANSPORTATION INC's earnings per share declined by 25.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, STUDENT TRANSPORTATION INC reported lower earnings of $0.02 versus $0.04 in the prior year.
  • 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 Road & Rail industry. The net income has significantly decreased by 30.2% when compared to the same quarter one year ago, falling from $6.75 million to $4.71 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. 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 currently lower than what is desirable, coming in at 27.28%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.30% significantly 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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