3 Sell-Rated Dividend Stocks: USAC, NAP, FULL

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."

USA Compression Partners

Dividend Yield: 19.60%

USA Compression Partners (NYSE: USAC) shares currently have a dividend yield of 19.60%.

USA Compression Partners, LP provides natural gas compression services under term contracts with customers in the oil and gas industry in the United States. It engineers, designs, operates, services, and repairs its compression units and maintains related support inventory and equipment.

The average volume for USA Compression Partners has been 234,800 shares per day over the past 30 days. USA Compression Partners has a market cap of $564.4 million and is part of the energy industry. Shares are down 1.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates USA Compression Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, 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 Energy Equipment & Services industry. The net income has significantly decreased by 1978.0% when compared to the same quarter one year ago, falling from $8.50 million to -$159.63 million.
  • The debt-to-equity ratio of 1.02 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, USAC has a quick ratio of 0.51, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • 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 Energy Equipment & Services industry and the overall market, USA COMPRESSION PRTNRS LP'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 49.05%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1777.77% 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.
  • USA COMPRESSION PRTNRS 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, USA COMPRESSION PRTNRS LP swung to a loss, reporting -$2.93 versus $0.57 in the prior year. This year, the market expects an improvement in earnings ($0.54 versus -$2.93).

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Navios Maritime Midstream Partners

Dividend Yield: 17.60%

Navios Maritime Midstream Partners (NYSE: NAP) shares currently have a dividend yield of 17.60%.

Navios Maritime Midstream Partners L.P. owns and operates very large crude oil (VLCC) tankers under long-term contracts with international oil companies, refiners, and large vessel operators. As of December 31, 2014, it owned four VLCC tanker vessels. The company has a P/E ratio of 7.21.

The average volume for Navios Maritime Midstream Partners has been 158,500 shares per day over the past 30 days. Navios Maritime Midstream Partners has a market cap of $194.5 million and is part of the transportation industry. Shares are down 12.6% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Navios Maritime Midstream 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:
  • NAP'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 32.21%, 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. 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.
  • NAP's debt-to-equity ratio of 0.71 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 11.22 is very high and demonstrates very strong liquidity.
  • The gross profit margin for NAVIOS MARITIME MIDSTR PN LP is currently very high, coming in at 95.64%. Regardless of NAP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NAP's net profit margin of 35.35% significantly outperformed against the industry.
  • Net operating cash flow has increased to $15.74 million or 28.70% when compared to the same quarter last year. In addition, NAVIOS MARITIME MIDSTR PN LP has also vastly surpassed the industry average cash flow growth rate of -39.38%.
  • When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NAVIOS MARITIME MIDSTR PN LP's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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Full Circle Capital

Dividend Yield: 17.40%

Full Circle Capital (NASDAQ: FULL) shares currently have a dividend yield of 17.40%.

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 65,400 shares per day over the past 30 days. Full Circle Capital has a market cap of $54.2 million and is part of the financial services industry. Shares are down 7.3% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Full Circle Capital 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:
  • FULL'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 34.92%, 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.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. 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.
  • Net operating cash flow has significantly increased by 91.70% to $15.93 million when compared to the same quarter last year. Despite an increase in cash flow, FULL CIRCLE CAPITAL CORP's cash flow growth rate is still lower than the industry average growth rate of 139.02%.
  • The gross profit margin for FULL CIRCLE CAPITAL CORP is currently very high, coming in at 253.89%. It has increased significantly from the same period last year. Along with this, the net profit margin of 355.64% significantly outperformed against the industry average.
  • FULL CIRCLE CAPITAL CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. 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 ($0.34 versus -$0.41).

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