What To Sell: 3 Sell-Rated Dividend Stocks PAAS, EXXI, APO

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."

Pan American Silver

Dividend Yield: 5.30%

Pan American Silver (NASDAQ: PAAS) shares currently have a dividend yield of 5.30%.

Pan American Silver Corp., together with its subsidiaries, operates and develops, and explores for silver producing properties and assets in Mexico, Peru, Argentina, and Bolivia. The company also produces and sells gold, zinc, lead, and copper.

The average volume for Pan American Silver has been 1,718,800 shares per day over the past 30 days. Pan American Silver has a market cap of $1.4 billion and is part of the metals & mining industry. Shares are down 19.1% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Pan American Silver as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, PAN AMERICAN SILVER CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The gross profit margin for PAN AMERICAN SILVER CORP is rather low; currently it is at 24.17%. Regardless of PAAS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, PAAS's net profit margin of -2.72% significantly underperformed when compared to the industry average.
  • PAAS has underperformed the S&P 500 Index, declining 12.36% from its price level of one year ago. 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.
  • PAN AMERICAN SILVER CORP 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, PAN AMERICAN SILVER CORP swung to a loss, reporting -$2.98 versus $0.57 in the prior year. This year, the market expects an improvement in earnings ($0.07 versus -$2.98).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 97.1% when compared to the same quarter one year prior, rising from -$186.54 million to -$5.47 million.

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Energy XXI

Dividend Yield: 6.90%

Energy XXI (NASDAQ: EXXI) shares currently have a dividend yield of 6.90%.

Energy XXI (Bermuda) Limited is engaged in the acquisition, exploration, development, production, and operation of oil and natural gas properties onshore in Louisiana and Texas, and on the Gulf of Mexico. The company has a P/E ratio of 232.50.

The average volume for Energy XXI has been 5,561,600 shares per day over the past 30 days. Energy XXI has a market cap of $654.7 million and is part of the energy industry. Shares are down 74.7% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Energy XXI 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, generally high debt management risk and disappointing return on equity.

Highlights from the ratings report include:
  • The debt-to-equity ratio is very high at 2.11 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.41, which clearly demonstrates the inability to cover short-term cash needs.
  • 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, ENERGY XXI (BERMUDA)'s return on equity significantly trails that of both the industry average and the S&P 500.
  • ENERGY XXI (BERMUDA) 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, ENERGY XXI (BERMUDA) reported lower earnings of $0.61 versus $1.84 in the prior year. For the next year, the market is expecting a contraction of 34.4% in earnings ($0.40 versus $0.61).
  • 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 114.8% when compared to the same quarter one year ago, falling from $43.14 million to -$6.40 million.
  • The gross profit margin for ENERGY XXI (BERMUDA) is rather high; currently it is at 62.41%. Regardless of EXXI'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 -1.58% 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.

Apollo Global Management

Dividend Yield: 12.90%

Apollo Global Management (NYSE: APO) shares currently have a dividend yield of 12.90%.

Apollo Global Management, LLC is a publicly owned investment manager. It primarily provides its services to endowment and sovereign wealth funds, as well as other institutional and individual investors. The firm manages client focused portfolios. The company has a P/E ratio of 14.75.

The average volume for Apollo Global Management has been 1,287,800 shares per day over the past 30 days. Apollo Global Management has a market cap of $3.7 billion and is part of the financial services industry. Shares are down 28.4% year-to-date as of the close of trading on Thursday.

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 Apollo Global Management as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, poor profit margins, 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 Capital Markets industry. The net income has significantly decreased by 98.8% when compared to the same quarter one year ago, falling from $192.52 million to $2.21 million.
  • The gross profit margin for APOLLO GLOBAL MANAGEMENT LLC is currently lower than what is desirable, coming in at 28.17%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 0.99% significantly trails the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 32.64%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 104.42% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • APOLLO GLOBAL MANAGEMENT LLC 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, APOLLO GLOBAL MANAGEMENT LLC increased its bottom line by earning $3.97 versus $1.95 in the prior year. For the next year, the market is expecting a contraction of 56.2% in earnings ($1.74 versus $3.97).
  • APO, with its very weak revenue results, has greatly underperformed against the industry average of 1.0%. Since the same quarter one year prior, revenues plummeted by 80.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing 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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