3 Sell-Rated Dividend Stocks: UDF, RNF, CORR

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."

United Development Funding IV

Dividend Yield: 16.10%

United Development Funding IV (NASDAQ: UDF) shares currently have a dividend yield of 16.10%.

United Development Funding IV operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 5.52.

The average volume for United Development Funding IV has been 433,800 shares per day over the past 30 days. United Development Funding IV has a market cap of $311.6 million and is part of the real estate industry. Shares are down 12.2% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates United Development Funding IV as a sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has decreased to $12.74 million or 10.77% 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.
  • UDF's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 41.39%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, UNITED DEV FUNDING IV's return on equity is below that of both the industry average and the S&P 500.
  • The gross profit margin for UNITED DEV FUNDING IV is rather high; currently it is at 62.04%. Regardless of UDF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, UDF's net profit margin of 52.43% significantly outperformed against the industry.

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Rentech Nitrogen Partners

Dividend Yield: 12.40%

Rentech Nitrogen Partners (NYSE: RNF) shares currently have a dividend yield of 12.40%.

Rentech Nitrogen Partners, L.P. produces and sells nitrogen fertilizer products in the United States and internationally. It operates through two segments, East Dubuque and Pasadena.

The average volume for Rentech Nitrogen Partners has been 92,000 shares per day over the past 30 days. Rentech Nitrogen Partners has a market cap of $313.4 million and is part of the chemicals industry. Shares are down 23.7% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Rentech Nitrogen Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, weak operating cash flow, 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 Chemicals industry. The net income has significantly decreased by 721.7% when compared to the same quarter one year ago, falling from -$3.11 million to -$25.51 million.
  • Net operating cash flow has decreased to $44.81 million or 11.45% 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 RENTECH NITROGEN PARTNERS LP is currently lower than what is desirable, coming in at 30.29%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, RNF's net profit margin of -30.25% significantly underperformed when compared to the industry average.
  • The share price of RENTECH NITROGEN PARTNERS LP has not done very well: it is down 13.09% 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.
  • RENTECH NITROGEN 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. 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, RENTECH NITROGEN PARTNERS LP swung to a loss, reporting -$0.03 versus $0.10 in the prior year. This year, the market expects an improvement in earnings ($1.75 versus -$0.03).

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CorEnergy Infrastructure

Dividend Yield: 12.00%

CorEnergy Infrastructure (NYSE: CORR) shares currently have a dividend yield of 12.00%.

CorEnergy Infrastructure Trust, Inc. is an open-ended equity trust launched and managed by Corridor InfraTrust Management, LLC. The trust primarily owns midstream and downstream U.S. energy infrastructure assets subject to long-term triple net participating leases with energy companies. The company has a P/E ratio of 71.29.

The average volume for CorEnergy Infrastructure has been 70,600 shares per day over the past 30 days. CorEnergy Infrastructure has a market cap of $297.6 million and is part of the real estate industry. Shares are up 270.8% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates CorEnergy Infrastructure as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, disappointing return on equity, 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 77.4% when compared to the same quarter one year ago, falling from $1.89 million to $0.43 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 Real Estate Investment Trusts (REITs) industry and the overall market, CORENERGY INFRASTRUCTURE TR's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for CORENERGY INFRASTRUCTURE TR is rather low; currently it is at 22.72%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 1.90% significantly trails 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 49.37%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 116.66% 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.
  • CORENERGY INFRASTRUCTURE TR 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, CORENERGY INFRASTRUCTURE TR increased its bottom line by earning $1.15 versus $0.90 in the prior year. For the next year, the market is expecting a contraction of 5.0% in earnings ($1.09 versus $1.15).

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