What To Sell: 3 Sell-Rated Dividend Stocks LEJU, LGCY, OCIP

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."

Leju Holdings

Dividend Yield: 8.50%

Leju Holdings (NYSE: LEJU) shares currently have a dividend yield of 8.50%.

Leju Holdings Limited, through its subsidiaries, provides online real estate services in the People's Republic of China. The company has a P/E ratio of 13.79.

The average volume for Leju Holdings has been 463,300 shares per day over the past 30 days. Leju Holdings has a market cap of $1.3 billion and is part of the real estate industry. Shares are down 20.7% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Leju Holdings as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income and weak operating cash flow.

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 Internet Software & Services industry. The net income has significantly decreased by 337.4% when compared to the same quarter one year ago, falling from $2.24 million to -$5.32 million.
  • Net operating cash flow has significantly decreased to -$24.20 million or 461.19% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • LEJU HOLDINGS LTD -ADR 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 ($0.67 versus $0.50).
  • The gross profit margin for LEJU HOLDINGS LTD -ADR is currently very high, coming in at 84.13%. Regardless of LEJU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LEJU's net profit margin of -5.68% significantly underperformed when compared to the industry average.
  • The share price of LEJU HOLDINGS LTD -ADR has not done very well: it is down 6.67% 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.

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Legacy Reserves

Dividend Yield: 12.80%

Legacy Reserves (NASDAQ: LGCY) shares currently have a dividend yield of 12.80%.

Legacy Reserves LP owns and operates oil and natural gas properties in the United States.

The average volume for Legacy Reserves has been 491,000 shares per day over the past 30 days. Legacy Reserves has a market cap of $759.9 million and is part of the energy industry. Shares are down 5.1% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Legacy Reserves 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 43608.4% when compared to the same quarter one year ago, falling from $0.53 million to -$228.85 million.
  • The debt-to-equity ratio is very high at 2.67 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, LGCY maintains a poor quick ratio of 0.74, 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, LEGACY RESERVES 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 57.66%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 34000.00% 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.
  • LEGACY RESERVES 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, LEGACY RESERVES LP reported poor results of -$4.24 versus -$0.62 in the prior year. This year, the market expects an improvement in earnings (-$0.93 versus -$4.24).

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OCI Partners

Dividend Yield: 7.50%

OCI Partners (NYSE: OCIP) shares currently have a dividend yield of 7.50%.

OCI Partners LP produces and sells methanol and ammonia in the United States. The company sells its products to industrial users and commercial traders for further processing or distribution. OCI GP LLC operates as the general partner of the company. The company has a P/E ratio of 11.82.

The average volume for OCI Partners has been 44,500 shares per day over the past 30 days. OCI Partners has a market cap of $1.5 billion and is part of the chemicals industry. Shares are up 8.2% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates OCI 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, poor profit margins, 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 Chemicals industry. The net income has significantly decreased by 96.9% when compared to the same quarter one year ago, falling from $29.01 million to $0.89 million.
  • The debt-to-equity ratio is very high at 2.58 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 0.30, which clearly demonstrates the inability to cover short-term cash needs.
  • The gross profit margin for OCI PARTNERS LP is currently lower than what is desirable, coming in at 33.33%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 2.36% significantly trails the industry average.
  • Net operating cash flow has significantly decreased to $13.99 million or 66.40% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The share price of OCI PARTNERS LP has not done very well: it is down 13.38% 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.

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