What To Sell: 3 Sell-Rated Dividend Stocks ANH, OAKS, GOOD

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."

Anworth Mortgage Asset

Dividend Yield: 12.80%

Anworth Mortgage Asset (NYSE: ANH) shares currently have a dividend yield of 12.80%.

Anworth Mortgage Asset Corporation operates as a real estate investment trust primarily in the United States.

The average volume for Anworth Mortgage Asset has been 595,300 shares per day over the past 30 days. Anworth Mortgage Asset has a market cap of $451.4 million and is part of the real estate industry. Shares are up 6% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Anworth Mortgage Asset as a sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, unimpressive growth in net income and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • In its most recent trading session, ANH has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income has decreased by 24.2% when compared to the same quarter one year ago, dropping from -$16.31 million to -$20.26 million.
  • ANWORTH MTG ASSET CORP's earnings per share declined by 29.4% in the most recent quarter compared to 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, ANWORTH MTG ASSET CORP reported lower earnings of $0.07 versus $0.18 in the prior year. This year, the market expects an improvement in earnings ($0.19 versus $0.07).
  • 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ANWORTH MTG ASSET CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ANWORTH MTG ASSET CORP is currently very high, coming in at 90.12%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -55.42% is in-line with the industry average.

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Five Oaks Investment

Dividend Yield: 12.90%

Five Oaks Investment (NYSE: OAKS) shares currently have a dividend yield of 12.90%.

Five Oaks Investment Corp. focuses on investing, financing, and managing a portfolio of residential mortgage loans and mortgage-backed securities (MBS).

The average volume for Five Oaks Investment has been 69,700 shares per day over the past 30 days. Five Oaks Investment has a market cap of $81.7 million and is part of the real estate industry. Shares are up 2.9% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Five Oaks Investment 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, 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 230.4% when compared to the same quarter one year ago, falling from -$5.13 million to -$16.95 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, FIVE OAKS INVESTMENT CORP'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 $0.65 million or 70.95% 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 34.38%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 197.56% 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.
  • FIVE OAKS INVESTMENT 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. 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, FIVE OAKS INVESTMENT CORP reported poor results of -$0.21 versus -$0.03 in the prior year. This year, the market expects an improvement in earnings ($0.82 versus -$0.21).

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Gladstone Commercial

Dividend Yield: 8.90%

Gladstone Commercial (NASDAQ: GOOD) shares currently have a dividend yield of 8.90%.

Gladstone Commercial Corporation operates as a real estate investment trust (REIT) in the United States. It engages in investing in and owning net leased industrial and commercial real properties, and making long-term industrial and commercial mortgage loans.

The average volume for Gladstone Commercial has been 125,200 shares per day over the past 30 days. Gladstone Commercial has a market cap of $399.3 million and is part of the real estate industry. Shares are up 17.3% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Gladstone Commercial as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, GLADSTONE COMMERCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has declined marginally to $8.78 million or 1.72% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • 43.03% is the gross profit margin for GLADSTONE COMMERCIAL CORP which we consider to be strong. Regardless of GOOD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GOOD's net profit margin of 3.96% is significantly lower than the industry average.
  • GLADSTONE COMMERCIAL CORP has improved earnings per share by 33.3% 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, GLADSTONE COMMERCIAL CORP continued to lose money by earning -$0.07 versus -$0.61 in the prior year. For the next year, the market is expecting a contraction of 7.1% in earnings (-$0.08 versus -$0.07).
  • After a year of stock price fluctuations, the net result is that GOOD's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Regardless of the rise in share value over the previous year, we feel that the risks involved in investing in this stock do not compensate for any future upside potential.

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