What To Sell: 3 Sell-Rated Dividend Stocks SPP, ASC, ARCX

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."

Sanchez Production Partners

Dividend Yield: 16.00%

Sanchez Production Partners (AMEX: SPP) shares currently have a dividend yield of 16.00%.

Sanchez Production Partners LP engages in the acquisition, development, ownership, and operation of midstream and other energy production assets in the United States. The company's Exploration and Production segment explore for and produces crude oil and natural gas.

The average volume for Sanchez Production Partners has been 37,300 shares per day over the past 30 days. Sanchez Production Partners has a market cap of $44.1 million and is part of the energy industry. Shares are down 27.2% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Sanchez Production 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:
  • SPP'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 47.99%, 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.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SANCHEZ PRODUCTION PARTNERS's return on equity significantly trails that of both the industry average and the S&P 500.
  • SPP's debt-to-equity ratio of 0.78 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. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.35 is sturdy.
  • SANCHEZ PRODUCTION PARTNERS reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, SANCHEZ PRODUCTION PARTNERS swung to a loss, reporting -$52.70 versus $3.20 in the prior year.
  • 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 105.9% when compared to the same quarter one year prior, rising from -$89.99 million to $5.28 million.

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Ardmore Shipping

Dividend Yield: 8.10%

Ardmore Shipping (NYSE: ASC) shares currently have a dividend yield of 8.10%.

Ardmore Shipping Corporation engages in the seaborne transportation of petroleum products and chemicals through product and chemical tankers worldwide. As of December 31, 2015, the company operated 24 vessels. The company has a P/E ratio of 6.41.

The average volume for Ardmore Shipping has been 344,800 shares per day over the past 30 days. Ardmore Shipping has a market cap of $204.5 million and is part of the transportation industry. Shares are down 40.1% year-to-date as of the close of trading on Wednesday.

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

Highlights from the ratings report include:
  • The debt-to-equity ratio of 1.18 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, ASC maintains a poor quick ratio of 0.94, which illustrates the inability to avoid short-term cash problems.
  • ASC'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 34.17%, 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.
  • ARDMORE SHIPPING CORP has improved earnings per share by 30.0% 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ARDMORE SHIPPING CORP increased its bottom line by earning $1.23 versus $0.05 in the prior year. For the next year, the market is expecting a contraction of 12.2% in earnings ($1.08 versus $1.23).
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ARDMORE SHIPPING CORP'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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Arc Logistics Partners

Dividend Yield: 13.90%

Arc Logistics Partners (NYSE: ARCX) shares currently have a dividend yield of 13.90%.

Arc Logistics Partners LP engages in the terminalling, storage, throughput, and transloading of crude oil and petroleum products. The company has a P/E ratio of 23.92.

The average volume for Arc Logistics Partners has been 34,900 shares per day over the past 30 days. Arc Logistics Partners has a market cap of $244.2 million and is part of the energy industry. Shares are down 4.5% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Arc Logistics 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:
  • ARCX'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 26.14%, 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.
  • ARCX's debt-to-equity ratio of 0.63 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. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.13 is sturdy.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ARC LOGISTICS PARTNERS 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.
  • The gross profit margin for ARC LOGISTICS PARTNERS LP is rather high; currently it is at 66.67%. It has increased significantly from the same period last year. Along with this, the net profit margin of 11.95% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 131.72% to $12.52 million when compared to the same quarter last year. In addition, ARC LOGISTICS PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -48.95%.

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