What To Sell: 3 Sell-Rated Dividend Stocks ZFC, CCUR, GOOD

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

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."

ZAIS Financial

Dividend Yield: 9.30%

ZAIS Financial (NYSE: ZFC) shares currently have a dividend yield of 9.30%.

Zais Financial Corp. originates, acquires, finances, sells, services, and manages residential mortgage loans in the United States. It originates mortgage loans through its GMFS mortgage banking platform; and acquires performing, re-performing, and newly originated loans through other channels. The company has a P/E ratio of 5.60.

The average volume for ZAIS Financial has been 17,400 shares per day over the past 30 days. ZAIS Financial has a market cap of $137.4 million and is part of the real estate industry. Shares are down 0.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates ZAIS Financial as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow 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 97.6% when compared to the same quarter one year ago, falling from $8.06 million to $0.19 million.
  • Net operating cash flow has significantly decreased to -$7.08 million or 342.79% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • ZAIS FINANCIAL 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. 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, ZAIS FINANCIAL CORP increased its bottom line by earning $2.91 versus $0.81 in the prior year. For the next year, the market is expecting a contraction of 36.4% in earnings ($1.85 versus $2.91).
  • In its most recent trading session, ZFC 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. 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.
  • 45.06% is the gross profit margin for ZAIS FINANCIAL CORP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, ZFC's net profit margin of 1.29% is significantly lower than the industry average.

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Concurrent Computer

Dividend Yield: 7.50%

Concurrent Computer (NASDAQ: CCUR) shares currently have a dividend yield of 7.50%.

Concurrent Computer Corporation provides software, hardware, and professional services for the multi-screen video and real-time markets in North America, the Asia Pacific, Europe, and South America. It operates through two segments, Products and Services. The company has a P/E ratio of 3.56.

The average volume for Concurrent Computer has been 36,100 shares per day over the past 30 days. Concurrent Computer has a market cap of $60.2 million and is part of the computer hardware industry. Shares are down 10% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Concurrent Computer as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income 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 underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Computers & Peripherals industry average. The net income has significantly decreased by 27.5% when compared to the same quarter one year ago, falling from $1.08 million to $0.78 million.
  • Looking at the price performance of CCUR's shares over the past 12 months, there is not much good news to report: the stock is down 27.42%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.
  • CONCURRENT COMPUTER CP's earnings per share declined by 25.0% in the most recent quarter compared to 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, CONCURRENT COMPUTER CP increased its bottom line by earning $2.04 versus $0.49 in the prior year.
  • The revenue fell significantly faster than the industry average of 34.0%. Since the same quarter one year prior, revenues slightly dropped by 6.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The gross profit margin for CONCURRENT COMPUTER CP is rather high; currently it is at 58.94%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, CCUR's net profit margin of 4.58% significantly trails the industry average.

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Gladstone Commercial

Dividend Yield: 8.40%

Gladstone Commercial (NASDAQ: GOOD) shares currently have a dividend yield of 8.40%.

Gladstone Commercial Corporation operates as a real estate investment trust (REIT) in the United States. It engages in investing in and owning net leased industrial and commercial real properties, and making long-term industrial and commercial mortgage loans.

The average volume for Gladstone Commercial has been 99,500 shares per day over the past 30 days. Gladstone Commercial has a market cap of $363.8 million and is part of the real estate industry. Shares are up 3.9% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Gladstone Commercial as a sell. Among the areas we feel are negative, one of the most important has been an overall disappointing return on equity.

Highlights from the ratings report include:
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, GLADSTONE COMMERCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • In its most recent trading session, GOOD 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. 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.
  • GLADSTONE COMMERCIAL CORP reported significant earnings per share improvement in the most recent quarter compared to 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, GLADSTONE COMMERCIAL CORP reported poor results of -$0.61 versus -$0.22 in the prior year.
  • 42.92% is the gross profit margin for GLADSTONE COMMERCIAL CORP which we consider to be strong. Regardless of GOOD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GOOD's net profit margin of 32.07% compares favorably to the industry average.
  • Net operating cash flow has significantly increased by 120.68% to $9.52 million when compared to the same quarter last year. In addition, GLADSTONE COMMERCIAL CORP has also vastly surpassed the industry average cash flow growth rate of -62.88%.

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