3 Sell-Rated Dividend Stocks: AMID, FSAM, RAS

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."

American Midstream Partners

Dividend Yield: 13.70%

American Midstream Partners (NYSE: AMID) shares currently have a dividend yield of 13.70%.

American Midstream Partners, LP engages in gathering, treating, processing, and transporting natural gas in the United States. The company has a P/E ratio of 2.06.

The average volume for American Midstream Partners has been 249,400 shares per day over the past 30 days. American Midstream Partners has a market cap of $372.9 million and is part of the energy industry. Shares are up 42.9% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates American Midstream 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, poor profit margins and weak operating cash flow.

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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 578.3% when compared to the same quarter one year ago, falling from $0.83 million to -$3.95 million.
  • The debt-to-equity ratio is very high at 2.13 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.16, which clearly demonstrates the inability to cover short-term cash 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 Oil, Gas & Consumable Fuels industry and the overall market, AMERICAN MIDSTREAM PRTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for AMERICAN MIDSTREAM PRTNRS LP is currently extremely low, coming in at 10.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -8.58% is significantly below that of the industry average.
  • Net operating cash flow has declined marginally to $8.22 million or 9.72% when compared to the same quarter last year. Despite a decrease in cash flow AMERICAN MIDSTREAM PRTNRS LP is still fairing well by exceeding its industry average cash flow growth rate of -49.95%.

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Fifth Street Asset Management

Dividend Yield: 10.10%

Fifth Street Asset Management (NASDAQ: FSAM) shares currently have a dividend yield of 10.10%.

Fifth Street Asset Management Inc. is an asset management holding company. The firm provides asset management services through its subsidiaries. Fifth Street Asset Management Inc. was founded in 1998 and is headquartered in Greenwich, Connecticut.

The average volume for Fifth Street Asset Management has been 45,800 shares per day over the past 30 days. Fifth Street Asset Management has a market cap of $193.8 million and is part of the financial services industry. Shares are up 22.7% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Fifth Street Asset Management as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, poor profit margins, 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 Capital Markets industry. The net income has significantly decreased by 195.5% when compared to the same quarter one year ago, falling from $1.30 million to -$1.24 million.
  • The gross profit margin for FIFTH STREET ASSET MGMT INC is currently lower than what is desirable, coming in at 32.58%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -6.50% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$15.03 million or 249.97% 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 60.71%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 214.28% 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.
  • FSAM, with its decline in revenue, slightly underperformed the industry average of 23.7%. Since the same quarter one year prior, revenues fell by 23.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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RAIT Financial

Dividend Yield: 11.40%

RAIT Financial (NYSE: RAS) shares currently have a dividend yield of 11.40%.

RAIT Financial Trust operates as a self-managed and self-advised real estate investment trust (REIT). The company, through its subsidiaries, invests in, manages, and services real estate-related assets with a focus on commercial real estate.

The average volume for RAIT Financial has been 562,200 shares per day over the past 30 days. RAIT Financial has a market cap of $290.3 million and is part of the real estate industry. Shares are up 15.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates RAIT Financial as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 1323.6% when compared to the same quarter one year ago, falling from $0.76 million to -$9.32 million.
  • The gross profit margin for RAIT FINANCIAL TRUST is currently lower than what is desirable, coming in at 31.44%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -9.56% 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 48.78%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 122.22% 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.
  • RAIT FINANCIAL TRUST 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, RAIT FINANCIAL TRUST turned its bottom line around by earning $0.08 versus -$3.88 in the prior year. For the next year, the market is expecting a contraction of 381.3% in earnings (-$0.23 versus $0.08).
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, RAIT FINANCIAL TRUST's return on equity significantly trails that of both the industry average and the S&P 500.

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