What To Sell: 3 Sell-Rated Dividend Stocks DLNG, CEQP, IRT

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."

Dynagas LNG Partners

Dividend Yield: 9.30%

Dynagas LNG Partners (NYSE: DLNG) shares currently have a dividend yield of 9.30%.

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 11.12.

The average volume for Dynagas LNG Partners has been 79,700 shares per day over the past 30 days. Dynagas LNG Partners has a market cap of $373.8 million and is part of the transportation industry. Shares are up 11.5% year-to-date as of the close of trading on Monday.

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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 24.34% 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 -53.28%.
  • 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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Crestwood Equity Partners

Dividend Yield: 11.80%

Crestwood Equity Partners (NYSE: CEQP) shares currently have a dividend yield of 11.80%.

Crestwood Equity Partners LP provides midstream solutions to customers in the crude oil, natural gas liquids (NGLs), and natural gas sectors of the energy industry in the United States. The company has a P/E ratio of 20.22.

The average volume for Crestwood Equity Partners has been 610,500 shares per day over the past 30 days. Crestwood Equity Partners has a market cap of $866.9 million and is part of the energy industry. Shares are down 42.6% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Crestwood Equity Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk, generally disappointing historical performance in the stock itself, 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 against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 57.6% when compared to the same quarter one year ago, falling from $19.60 million to $8.30 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 67.76%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 63.63% 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.
  • The debt-to-equity ratio is very high at 3.27 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, CEQP's quick ratio is somewhat strong at 1.05, demonstrating the ability to handle short-term liquidity needs.
  • The gross profit margin for CRESTWOOD EQUITY PARTNERS LP is currently lower than what is desirable, coming in at 27.59%. Regardless of CEQP'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 1.13% trails the industry average.
  • CRESTWOOD EQUITY 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, CRESTWOOD EQUITY PARTNERS LP increased its bottom line by earning $0.32 versus $0.15 in the prior year. For the next year, the market is expecting a contraction of 9.4% in earnings ($0.29 versus $0.32).

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Independence Realty

Dividend Yield: 8.60%

Independence Realty (AMEX: IRT) shares currently have a dividend yield of 8.60%.

Independence Realty Trust, Inc is an equity real estate investment trust launched by RAIT Financial Trust. It is managed by Independence Realty Advisors, LLC. The fund invests in the real estate markets of the United States. It makes investments in apartment properties to create its portfolio.

The average volume for Independence Realty has been 140,600 shares per day over the past 30 days. Independence Realty has a market cap of $265.7 million and is part of the real estate industry. Shares are down 10.5% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Independence Realty as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, poor profit margins, 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 107.9% when compared to the same quarter one year ago, falling from $2.94 million to -$0.23 million.
  • The gross profit margin for INDEPENDENCE REALTY TRUST is rather low; currently it is at 17.42%. Regardless of IRT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, IRT's net profit margin of -1.07% significantly underperformed when compared to the industry average.
  • The share price of INDEPENDENCE REALTY TRUST has not done very well: it is down 8.06% 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.
  • INDEPENDENCE REALTY TRUST 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, INDEPENDENCE REALTY TRUST increased its bottom line by earning $0.19 versus $0.06 in the prior year. For the next year, the market is expecting a contraction of 121.1% in earnings (-$0.04 versus $0.19).
  • Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, INDEPENDENCE REALTY TRUST's return on equity significantly trails that of both the industry average and the S&P 500.

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