What To Sell: 3 Sell-Rated Dividend Stocks NSLP, ANH, DLNG

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."

New Source Energy Partners

Dividend Yield: 15.60%

New Source Energy Partners (NYSE: NSLP) shares currently have a dividend yield of 15.60%.

New Source Energy Partners L.P. acquires, owns, develops, and produces oil and natural gas properties in the United States. It operates through two segments, Exploration and Production, and Oilfield Services.

The average volume for New Source Energy Partners has been 83,900 shares per day over the past 30 days. New Source Energy Partners has a market cap of $84.9 million and is part of the energy industry. Shares are down 29.7% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates New Source Energy Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 280.2% when compared to the same quarter one year ago, falling from $21.85 million to -$39.37 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 Oil, Gas & Consumable Fuels industry and the overall market, NEW SOURCE ENERGY PRTRS 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 76.35%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 188.06% 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.
  • NEW SOURCE ENERGY PRTRS 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, NEW SOURCE ENERGY PRTRS LP swung to a loss, reporting -$2.32 versus $2.92 in the prior year. This year, the market expects an improvement in earnings (-$1.05 versus -$2.32).
  • 43.15% is the gross profit margin for NEW SOURCE ENERGY PRTRS LP 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, NSLP's net profit margin of -71.62% significantly underperformed when compared to the industry average.

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Anworth Mortgage Asset

Dividend Yield: 11.60%

Anworth Mortgage Asset (NYSE: ANH) shares currently have a dividend yield of 11.60%.

Anworth Mortgage Asset Corporation operates as a real estate investment trust in the United States.

The average volume for Anworth Mortgage Asset has been 734,700 shares per day over the past 30 days. Anworth Mortgage Asset has a market cap of $544.0 million and is part of the real estate industry. Shares are down 1.3% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Anworth Mortgage Asset as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating 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 221.9% when compared to the same quarter one year ago, falling from $13.37 million to -$16.31 million.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, ANWORTH MTG ASSET CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • In its most recent trading session, ANH 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. 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.
  • ANWORTH MTG ASSET 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 two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ANWORTH MTG ASSET CORP reported lower earnings of $0.18 versus $0.49 in the prior year. This year, the market expects an improvement in earnings ($0.23 versus $0.18).
  • The revenue fell significantly faster than the industry average of 8.4%. Since the same quarter one year prior, revenues fell by 22.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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Dynagas LNG Partners

Dividend Yield: 8.40%

Dynagas LNG Partners (NYSE: DLNG) shares currently have a dividend yield of 8.40%.

Dynagas LNG Partners LP, through its subsidiaries, operates in the seaborne transportation industry worldwide. The company owns and operates liquefied natural gas (LNG) vessels. The company has a P/E ratio of 12.20.

The average volume for Dynagas LNG Partners has been 86,100 shares per day over the past 30 days. Dynagas LNG Partners has a market cap of $410.3 million and is part of the transportation industry. Shares are up 23.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Dynagas LNG Partners 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:
  • Currently the debt-to-equity ratio of 1.92 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, DLNG has a quick ratio of 0.50, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • DLNG has underperformed the S&P 500 Index, declining 12.46% 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.
  • The gross profit margin for DYNAGAS LNG PARTNERS LP is currently very high, coming in at 82.56%. Regardless of DLNG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DLNG's net profit margin of 41.76% significantly outperformed against the industry.
  • Net operating cash flow has significantly increased by 81.60% to $26.39 million when compared to the same quarter last year. In addition, DYNAGAS LNG PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -53.34%.
  • Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, DYNAGAS LNG PARTNERS LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

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