3 Sell-Rated Dividend Stocks: AMTG, CIO, KRO

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."

Apollo Residential Mortgage

Dividend Yield: 14.60%

Apollo Residential Mortgage (NYSE: AMTG) shares currently have a dividend yield of 14.60%.

Apollo Residential Mortgage, Inc. primarily invests in residential mortgage assets in the United States.

The average volume for Apollo Residential Mortgage has been 525,800 shares per day over the past 30 days. Apollo Residential Mortgage has a market cap of $419.2 million and is part of the real estate industry. Shares are up 9.8% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Apollo Residential Mortgage as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, 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 109.0% when compared to the same quarter one year ago, falling from $13.29 million to -$1.19 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, APOLLO RESIDENTIAL MTG INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The share price of APOLLO RESIDENTIAL MTG INC has not done very well: it is down 16.20% 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.
  • APOLLO RESIDENTIAL MTG INC 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, APOLLO RESIDENTIAL MTG INC swung to a loss, reporting -$0.82 versus $2.54 in the prior year. This year, the market expects an improvement in earnings ($1.90 versus -$0.82).
  • AMTG, with its decline in revenue, underperformed when compared the industry average of 7.9%. Since the same quarter one year prior, revenues slightly dropped by 3.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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City Office REIT

Dividend Yield: 7.80%

City Office REIT (NYSE: CIO) shares currently have a dividend yield of 7.80%.

City Office REIT, Inc is an equity real estate investment trust. The fund invests in the real estate markets of the United States. It acquires, own and operate high-quality office properties. City Office REIT, Inc was formed in November 26, 2013 and is domiciled in the United States.

The average volume for City Office REIT has been 27,800 shares per day over the past 30 days. City Office REIT has a market cap of $155.4 million and is part of the real estate industry. Shares are up 0.3% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates City Office REIT as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 41.4% when compared to the same quarter one year ago, falling from -$1.77 million to -$2.50 million.
  • The gross profit margin for CITY OFFICE REIT INC is rather low; currently it is at 19.73%. Regardless of CIO's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CIO's net profit margin of -17.09% significantly underperformed when compared to the industry average.
  • CIO is off 5.48% from its price level of one year ago, reflecting the general market trend and ignoring their higher earnings per share 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.
  • Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CITY OFFICE REIT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 122.34% to $6.89 million when compared to the same quarter last year. In addition, CITY OFFICE REIT INC has also vastly surpassed the industry average cash flow growth rate of 2.04%.

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Kronos Worldwide

Dividend Yield: 10.30%

Kronos Worldwide (NYSE: KRO) shares currently have a dividend yield of 10.30%.

Kronos Worldwide, Inc. produces and markets titanium dioxide pigments (TiO2) worldwide.

The average volume for Kronos Worldwide has been 402,700 shares per day over the past 30 days. Kronos Worldwide has a market cap of $673.3 million and is part of the chemicals industry. Shares are down 1.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Kronos Worldwide as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating 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 Chemicals industry. The net income has significantly decreased by 137.0% when compared to the same quarter one year ago, falling from $31.90 million to -$11.80 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 Chemicals industry and the overall market, KRONOS WORLDWIDE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for KRONOS WORLDWIDE INC is rather low; currently it is at 15.96%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -3.50% is significantly below that of 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 47.44%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 135.71% 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.
  • KRONOS WORLDWIDE INC 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, KRONOS WORLDWIDE INC turned its bottom line around by earning $0.86 versus -$0.87 in the prior year. For the next year, the market is expecting a contraction of 93.6% in earnings ($0.06 versus $0.86).

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