What To Sell: 3 Sell-Rated Dividend Stocks EARN, FULL, HMLP

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."

Ellington Residential Mortgage REIT

Dividend Yield: 15.30%

Ellington Residential Mortgage REIT (NYSE: EARN) shares currently have a dividend yield of 15.30%.

Ellington Residential Mortgage REIT, a real estate investment trust, specializes in acquiring, investing in, and managing residential mortgage-and real estate-related assets.

The average volume for Ellington Residential Mortgage REIT has been 51,800 shares per day over the past 30 days. Ellington Residential Mortgage REIT has a market cap of $107.8 million and is part of the real estate industry. Shares are down 4.5% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Ellington Residential Mortgage REIT 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 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 236.3% when compared to the same quarter one year ago, falling from $3.53 million to -$4.82 million.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, ELLINGTON RESIDENTIAL MTG'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 -$3.89 million or 428.37% 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 32.70%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 235.89% 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.
  • EARN, with its decline in revenue, slightly underperformed the industry average of 7.2%. Since the same quarter one year prior, revenues slightly dropped by 1.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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Full Circle Capital

Dividend Yield: 18.60%

Full Circle Capital (NASDAQ: FULL) shares currently have a dividend yield of 18.60%.

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 73,500 shares per day over the past 30 days. Full Circle Capital has a market cap of $50.8 million and is part of the financial services industry. Shares are down 8.9% year-to-date as of the close of trading on Thursday.

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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 50.71%, 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 4.2%. 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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Hoegh LNG Partners

Dividend Yield: 11.30%

Hoegh LNG Partners (NYSE: HMLP) shares currently have a dividend yield of 11.30%.

Hoegh LNG Partners LP focuses on owning, operating, and acquiring floating storage and regasification units, liquefied natural gas (LNG) carriers, and other LNG infrastructure assets under long-term charters. Hoegh LNG GP LLC is the general partner of the company. The company has a P/E ratio of 15.67.

The average volume for Hoegh LNG Partners has been 55,400 shares per day over the past 30 days. Hoegh LNG Partners has a market cap of $383.4 million and is part of the transportation industry. Shares are down 20.5% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Hoegh LNG Partners as a sell. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • HMLP'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 43.92%, 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.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 31.9%. Since the same quarter one year prior, revenues fell by 25.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • HMLP's debt-to-equity ratio of 0.84 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 4.03 is very high and demonstrates very strong liquidity.
  • HOEGH LNG PARTNERS LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.34 versus $0.04).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 56.8% when compared to the same quarter one year prior, rising from $3.31 million to $5.19 million.

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