What To Sell: 3 Sell-Rated Dividend Stocks KNOP, FULL, CNNX

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."

KNOT Offshore Partners

Dividend Yield: 18.60%

KNOT Offshore Partners (NYSE: KNOP) shares currently have a dividend yield of 18.60%.

KNOT Offshore Partners LP owns and operates shuttle tankers under long-term charters in the North Sea and Brazil. The company provides crude oil loading, transportation, and storage services under time charters and bareboat charters. The company has a P/E ratio of 10.27.

The average volume for KNOT Offshore Partners has been 126,000 shares per day over the past 30 days. KNOT Offshore Partners has a market cap of $154.8 million and is part of the transportation industry. Shares are down 20.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates KNOT Offshore Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The debt-to-equity ratio of 1.17 is relatively high when compared with the industry average, suggesting a need for better debt level management.
  • 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, KNOT OFFSHORE PRTNRS LP's return on equity is below 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 41.77%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 43.85% 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 change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 29.9% when compared to the same quarter one year ago, falling from $12.56 million to $8.80 million.
  • KNOT OFFSHORE PRTNRS LP's earnings per share declined by 43.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, KNOT OFFSHORE PRTNRS LP increased its bottom line by earning $1.34 versus $0.87 in the prior year. This year, the market expects an improvement in earnings ($1.41 versus $1.34).

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Full Circle Capital

Dividend Yield: 18.10%

Full Circle Capital (NASDAQ: FULL) shares currently have a dividend yield of 18.10%.

Full Circle Capital Corporation is a business development company specializing in debt and equity securities of smaller and lower middle-market companies.

The average volume for Full Circle Capital has been 68,200 shares per day over the past 30 days. Full Circle Capital has a market cap of $52.1 million and is part of the financial services industry. Shares are down 10.5% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Full Circle Capital as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity 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 Capital Markets industry. The net income has significantly decreased by 2243.2% when compared to the same quarter one year ago, falling from $0.23 million to -$4.91 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 Capital Markets industry and the overall market, FULL CIRCLE CAPITAL CORP'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 50.22%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1150.00% 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.
  • FULL, with its very weak revenue results, has greatly underperformed against the industry average of 5.6%. Since the same quarter one year prior, revenues plummeted by 204.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • FULL CIRCLE CAPITAL 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. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FULL CIRCLE CAPITAL CORP continued to lose money by earning -$0.41 versus -$0.83 in the prior year. This year, the market expects an improvement in earnings ($0.42 versus -$0.41).

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CONE Midstream Partners

Dividend Yield: 9.40%

CONE Midstream Partners (NYSE: CNNX) shares currently have a dividend yield of 9.40%.

CONE Midstream Partners LP acquires, owns, operates, and develops natural gas gathering and other midstream energy assets in the Marcellus Shale in Pennsylvania and West Virginia. The company was founded in 2014 and is based in Canonsburg, Pennsylvania. The company has a P/E ratio of 8.94.

The average volume for CONE Midstream Partners has been 195,900 shares per day over the past 30 days. CONE Midstream Partners has a market cap of $282.9 million and is part of the energy industry. Shares are down 5.8% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates CONE Midstream Partners as a sell. The area that we feel has been the company's primary weakness has been its generally higher debt management risk.

Highlights from the ratings report include:
  • CNNX's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.40 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The gross profit margin for CONE MIDSTREAM PARTNERS LP is rather high; currently it is at 69.84%. It has increased significantly from the same period last year. Along with this, the net profit margin of 36.57% significantly outperformed against the industry average.
  • Net operating cash flow has improved to $38.81 million from having none in the same quarter last year. Since the company had no net operating cash flow for the prior period, we cannot calculate a percent change in order to compare its growth rate with that of its industry average.
  • This stock's share value has moved by only 52.29% over the past year.
  • CONE MIDSTREAM PARTNERS LP has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. This year, the market expects an improvement in earnings ($1.13 versus $0.26).

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