What To Sell: 3 Sell-Rated Dividend Stocks ANH, MEP, STB

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."

Anworth Mortgage Asset

Dividend Yield: 11.70%

Anworth Mortgage Asset (NYSE: ANH) shares currently have a dividend yield of 11.70%.

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

The average volume for Anworth Mortgage Asset has been 708,500 shares per day over the past 30 days. Anworth Mortgage Asset has a market cap of $539.8 million and is part of the real estate industry. Shares are down 1.1% year-to-date as of the close of trading on Thursday.

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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, weak operating cash flow, 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.
  • Net operating cash flow has significantly decreased to $6.47 million or 55.40% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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).

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Midcoast Energy Partners

Dividend Yield: 11.70%

Midcoast Energy Partners (NYSE: MEP) shares currently have a dividend yield of 11.70%.

Midcoast Energy Partners, L.P. engages in gathering, processing, treating, transporting, and marketing natural gas and natural gas liquids (NGL) in the United States. It operates through two segments, Gathering, Processing, and Transportation; and Logistics and Marketing. The company has a P/E ratio of 12.55.

The average volume for Midcoast Energy Partners has been 88,600 shares per day over the past 30 days. Midcoast Energy Partners has a market cap of $269.5 million and is part of the energy industry. Shares are down 15.6% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Midcoast Energy Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, poor profit margins, weak operating cash flow, 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 5100.0% when compared to the same quarter one year ago, falling from $0.40 million to -$20.00 million.
  • The gross profit margin for MIDCOAST ENERGY PARTNERS LP is currently extremely low, coming in at 1.14%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.28% trails that of the industry average.
  • Net operating cash flow has decreased to $168.20 million or 21.32% when compared to the same quarter last year. Despite a decrease in cash flow MIDCOAST ENERGY PARTNERS LP is still fairing well by exceeding its industry average cash flow growth rate of -53.17%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 42.48%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 4500.00% 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.
  • MIDCOAST ENERGY 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. 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, MIDCOAST ENERGY PARTNERS LP increased its bottom line by earning $1.40 versus $0.21 in the prior year. For the next year, the market is expecting a contraction of 133.2% in earnings (-$0.47 versus $1.40).

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Student Transportation

Dividend Yield: 9.10%

Student Transportation (AMEX: STB) shares currently have a dividend yield of 9.10%.

Student Transportation Inc., together with its subsidiaries, provides school bus transportation services in the United States and Canada. It offers contracted, managed, special needs transportation, direct-to-parent, and charter services. The company has a P/E ratio of 246.50.

The average volume for Student Transportation has been 154,900 shares per day over the past 30 days. Student Transportation has a market cap of $472.3 million and is part of the transportation industry. Shares are down 20.9% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Student Transportation as a sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • The share price of STUDENT TRANSPORTATION INC has not done very well: it is down 20.42% 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. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
  • STUDENT TRANSPORTATION INC's earnings per share declined by 33.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, STUDENT TRANSPORTATION INC reported lower earnings of $0.02 versus $0.04 in the prior year.
  • 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 Road & Rail industry average. The net income has significantly decreased by 27.2% when compared to the same quarter one year ago, falling from $2.60 million to $1.89 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 Road & Rail industry and the overall market, STUDENT TRANSPORTATION INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for STUDENT TRANSPORTATION INC is rather low; currently it is at 23.13%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.21% significantly trails the industry average.

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