3 Sell-Rated Dividend Stocks: CAPL, OAKS, TOO

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."

CrossAmerica Partners

Dividend Yield: 7.10%

CrossAmerica Partners (NYSE: CAPL) shares currently have a dividend yield of 7.10%.

CrossAmerica Partners LP operates as a wholesale distributor of motor fuels, and owns and leases real estate used in the retail distribution of motor fuels in the United States.

The average volume for CrossAmerica Partners has been 55,000 shares per day over the past 30 days. CrossAmerica Partners has a market cap of $518.1 million and is part of the energy industry. Shares are down 24.1% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates CrossAmerica Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 447.9% when compared to the same quarter one year ago, falling from $3.92 million to -$13.64 million.
  • Currently the debt-to-equity ratio of 1.52 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, CAPL has a quick ratio of 0.57, this demonstrates the lack of ability of the company to cover short-term liquidity 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, CROSSAMERICA PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for CROSSAMERICA PARTNERS LP is currently extremely low, coming in at 3.89%. Regardless of CAPL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -2.32% trails the industry average.
  • CROSSAMERICA PARTNERS LP 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, CROSSAMERICA PARTNERS LP swung to a loss, reporting -$0.22 versus $1.19 in the prior year. This year, the market expects an improvement in earnings ($0.39 versus -$0.22).

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Five Oaks Investment

Dividend Yield: 14.20%

Five Oaks Investment (NYSE: OAKS) shares currently have a dividend yield of 14.20%.

Five Oaks Investment Corp. focuses on investing, financing, and managing a portfolio of mortgage-backed securities (MBS). It invests in agency and non-agency residential MBS, multi-family MBS, residential mortgage loans, mortgage servicing rights, and other mortgage-related investments. The company has a P/E ratio of 353.33.

The average volume for Five Oaks Investment has been 99,100 shares per day over the past 30 days. Five Oaks Investment has a market cap of $156.0 million and is part of the real estate industry. Shares are down 1.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Five Oaks Investment as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, disappointing return on equity, 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 133.5% when compared to the same quarter one year ago, falling from $10.74 million to -$3.60 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 Real Estate Investment Trusts (REITs) industry and the overall market, FIVE OAKS INVESTMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The share price of FIVE OAKS INVESTMENT CORP has not done very well: it is down 8.70% 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.
  • FIVE OAKS INVESTMENT 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. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FIVE OAKS INVESTMENT CORP swung to a loss, reporting -$0.03 versus $0.42 in the prior year. This year, the market expects an improvement in earnings ($1.35 versus -$0.03).
  • The gross profit margin for FIVE OAKS INVESTMENT CORP is currently very high, coming in at 83.59%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -12.36% is in-line with the industry average.

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Teekay Offshore Partners

Dividend Yield: 9.30%

Teekay Offshore Partners (NYSE: TOO) shares currently have a dividend yield of 9.30%.

Teekay Offshore Partners L.P. provides marine transportation, oil production, storage, towage, and floating accommodation services to the offshore oil industry in the North Sea and Brazil. The company has a P/E ratio of 24.80.

The average volume for Teekay Offshore Partners has been 237,800 shares per day over the past 30 days. Teekay Offshore Partners has a market cap of $2.1 billion and is part of the transportation industry. Shares are down 13.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Teekay Offshore Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 156.3% when compared to the same quarter one year ago, falling from $41.27 million to -$23.26 million.
  • The debt-to-equity ratio is very high at 3.23 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, TOO maintains a poor quick ratio of 0.72, which illustrates the inability to avoid short-term cash problems.
  • 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, TEEKAY OFFSHORE PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 31.43%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 182.92% compared to the year-earlier 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.
  • TEEKAY OFFSHORE PARTNERS LP 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, TEEKAY OFFSHORE PARTNERS LP swung to a loss, reporting -$0.22 versus $0.94 in the prior year. This year, the market expects an improvement in earnings ($1.42 versus -$0.22).

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