What To Sell: 3 Sell-Rated Dividend Stocks SEAS, ARR, PWE

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."

SeaWorld Entertainment

Dividend Yield: 4.10%

SeaWorld Entertainment (NYSE: SEAS) shares currently have a dividend yield of 4.10%.

SeaWorld Entertainment, Inc. operates as a theme park and entertainment company in the United States. The company has a P/E ratio of 18.87.

The average volume for SeaWorld Entertainment has been 2,914,600 shares per day over the past 30 days. SeaWorld Entertainment has a market cap of $1.9 billion and is part of the leisure industry. Shares are down 29.4% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates SeaWorld Entertainment as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • Although SEAS's debt-to-equity ratio of 2.95 is very high, it is currently less than that of the industry average. Along with this, the company manages to maintain a quick ratio of 0.34, which clearly demonstrates the inability to cover short-term cash needs.
  • SEAS'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 34.38%, 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.5%. Since the same quarter one year prior, revenues slightly dropped by 1.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • SEAWORLD ENTERTAINMENT INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SEAWORLD ENTERTAINMENT INC reported lower earnings of $0.57 versus $0.83 in the prior year. This year, the market expects an improvement in earnings ($0.85 versus $0.57).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market on the basis of return on equity, SEAWORLD ENTERTAINMENT INC has underperformed in comparison with the industry average, but has exceeded 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.

ARMOUR Residential REIT

Dividend Yield: 14.70%

ARMOUR Residential REIT (NYSE: ARR) shares currently have a dividend yield of 14.70%.

ARMOUR Residential REIT, Inc. invests in and manages a portfolio of residential mortgage backed securities in the United States. The company is managed by ARMOUR Residential Management LLC.

The average volume for ARMOUR Residential REIT has been 2,905,300 shares per day over the past 30 days. ARMOUR Residential REIT has a market cap of $1.5 billion and is part of the real estate industry. Shares are up 1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates ARMOUR Residential REIT 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 disappointing historical performance in the stock itself 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 114.6% when compared to the same quarter one year ago, falling from $481.39 million to -$70.19 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 Real Estate Investment Trusts (REITs) industry and the overall market, ARMOUR RESIDENTIAL REIT 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 $89.06 million or 25.15% 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.
  • The share price of ARMOUR RESIDENTIAL REIT INC has not done very well: it is down 6.87% 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.
  • ARMOUR RESIDENTIAL REIT 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ARMOUR RESIDENTIAL REIT INC swung to a loss, reporting -$0.53 versus $0.97 in the prior year. This year, the market expects an improvement in earnings ($0.58 versus -$0.53).

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

Penn West Petroleum

Dividend Yield: 7.00%

Penn West Petroleum (NYSE: PWE) shares currently have a dividend yield of 7.00%.

Penn West Petroleum Ltd., an exploration and production company, acquires, explores, develops, exploits, and holds interests in petroleum and natural gas properties and related assets in western Canada.

The average volume for Penn West Petroleum has been 2,194,000 shares per day over the past 30 days. Penn West Petroleum has a market cap of $3.6 billion and is part of the energy industry. Shares are down 14.3% year-to-date as of the close of trading on Monday.

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 Penn West Petroleum as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow, feeble growth in its earnings per share and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, PENN WEST PETROLEUM LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has declined marginally to $232.00 million or 9.37% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, PENN WEST PETROLEUM LTD has marginally lower results.
  • PENN WEST PETROLEUM LTD reported flat earnings per share in the most recent quarter. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, PENN WEST PETROLEUM LTD swung to a loss, reporting -$1.71 versus $0.37 in the prior year.
  • PWE'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 35.04%, which is also worse than the performance of the S&P 500 Index. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.1%. Since the same quarter one year prior, revenues slightly dropped by 0.4%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.

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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