What To Sell: 3 Sell-Rated Dividend Stocks OCIP, SXE, SDLP

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."

OCI Partners

Dividend Yield: 7.60%

OCI Partners (NYSE: OCIP) shares currently have a dividend yield of 7.60%.

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 11.69.

The average volume for OCI Partners has been 44,200 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 9% 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 15.50% 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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Southcross Energy Partners

Dividend Yield: 12.60%

Southcross Energy Partners (NYSE: SXE) shares currently have a dividend yield of 12.60%.

Southcross Energy Partners, L.P., together with its subsidiaries, provides natural gas gathering, processing, treating, compression, and transportation services in the United States. The company also offers natural gas liquid (NGL) fractionation and transportation services.

The average volume for Southcross Energy Partners has been 162,000 shares per day over the past 30 days. Southcross Energy Partners has a market cap of $302.5 million and is part of the utilities industry. Shares are down 19.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Southcross 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, weak operating cash flow, poor profit margins 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 734.0% when compared to the same quarter one year ago, falling from -$1.29 million to -$10.75 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 Oil, Gas & Consumable Fuels industry and the overall market, SOUTHCROSS ENERGY PRTNRS LP'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 $3.43 million or 75.81% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The gross profit margin for SOUTHCROSS ENERGY PRTNRS LP is currently extremely low, coming in at 7.93%. Regardless of SXE's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SXE's net profit margin of -5.95% significantly underperformed when compared to the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 34.65%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 400.00% 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.

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Seadrill Partners

Dividend Yield: 16.30%

Seadrill Partners (NYSE: SDLP) shares currently have a dividend yield of 16.30%.

Seadrill Partners LLC owns, operates, and acquires offshore drilling units. The company primarily serves various oil and gas companies. As of March 31, 2015, its fleet consisted of four semi-submersible drilling rigs, three drillships, and three tender rigs. The company has a P/E ratio of 6.49.

The average volume for Seadrill Partners has been 392,500 shares per day over the past 30 days. Seadrill Partners has a market cap of $1.1 billion and is part of the energy industry. Shares are down 13.8% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Seadrill Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow, generally disappointing historical performance in the stock itself, generally high debt management risk, disappointing return on equity and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • Net operating cash flow has decreased to $169.10 million or 45.52% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 58.97%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 28.00% 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.
  • The debt-to-equity ratio is very high at 3.93 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, SDLP's quick ratio is somewhat strong at 1.05, demonstrating the ability to handle 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 Energy Equipment & Services industry and the overall market on the basis of return on equity, SEADRILL PARTNERS LLC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • SEADRILL PARTNERS LLC's earnings per share declined by 28.0% in the most recent quarter compared to 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, SEADRILL PARTNERS LLC reported lower earnings of $1.72 versus $1.86 in the prior year. This year, the market expects an improvement in earnings ($2.61 versus $1.72).

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