What To Sell: 3 Sell-Rated Dividend Stocks ENLK, WPG, IVR

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."

EnLink Midstream Partners

Dividend Yield: 8.70%

EnLink Midstream Partners (NYSE: ENLK) shares currently have a dividend yield of 8.70%.

EnLink Midstream Partners, LP, through its subsidiary, EnLink Midstream Operating, LP, provides midstream energy services.

The average volume for EnLink Midstream Partners has been 839,200 shares per day over the past 30 days. EnLink Midstream Partners has a market cap of $6.0 billion and is part of the energy industry. Shares are up 7.5% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates EnLink Midstream Partners 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 high debt management risk 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 1674.2% when compared to the same quarter one year ago, falling from $35.60 million to -$560.40 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 Oil, Gas & Consumable Fuels industry and the overall market, ENLINK MIDSTREAM PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ENLINK MIDSTREAM PARTNERS LP is rather low; currently it is at 23.08%. Regardless of ENLK's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, ENLK's net profit margin of -62.98% significantly underperformed when compared to the industry average.
  • ENLK's debt-to-equity ratio of 0.82 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. Despite the fact that ENLK's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.58 is low and demonstrates weak liquidity.
  • The share price of ENLINK MIDSTREAM PARTNERS LP has not done very well: it is down 11.38% 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. 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.

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WP Glimcher

Dividend Yield: 8.00%

WP Glimcher (NYSE: WPG) shares currently have a dividend yield of 8.00%.

Washington Prime Group Inc. (NYSE:WPG.WI) operates independently of Simon Property Group Inc. as of May 28, 2014.

The average volume for WP Glimcher has been 2,768,400 shares per day over the past 30 days. WP Glimcher has a market cap of $2.3 billion and is part of the real estate industry. Shares are up 17.1% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates WP Glimcher as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • 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, WP GLIMCHER INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for WP GLIMCHER INC is currently lower than what is desirable, coming in at 32.55%. Regardless of WPG's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, WPG's net profit margin of 5.75% is significantly lower than the industry average.
  • WPG has underperformed the S&P 500 Index, declining 9.32% from its price level of one year ago. 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.
  • WPG, with its decline in revenue, underperformed when compared the industry average of 12.1%. Since the same quarter one year prior, revenues fell by 12.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • WP GLIMCHER INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, WP GLIMCHER INC swung to a loss, reporting -$0.55 versus $1.10 in the prior year. This year, the market expects an improvement in earnings ($0.33 versus -$0.55).

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Invesco Mortgage Capital

Dividend Yield: 11.20%

Invesco Mortgage Capital (NYSE: IVR) shares currently have a dividend yield of 11.20%.

Invesco Mortgage Capital Inc., a real estate investment trust, focuses on investing in, financing, and managing residential and commercial mortgage-backed securities and mortgage loans. It invests in residential mortgage-backed securities (RMBS) for which the U.S.

The average volume for Invesco Mortgage Capital has been 980,800 shares per day over the past 30 days. Invesco Mortgage Capital has a market cap of $1.6 billion and is part of the real estate industry. Shares are up 15.8% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Invesco Mortgage Capital as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 1193.0% when compared to the same quarter one year ago, falling from -$11.72 million to -$151.59 million.
  • Net operating cash flow has declined marginally to $78.86 million or 9.79% 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.
  • In its most recent trading session, IVR 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. 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.
  • 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, INVESCO MORTGAGE CAPITAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for INVESCO MORTGAGE CAPITAL INC is currently very high, coming in at 90.91%. Regardless of IVR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, IVR's net profit margin of -119.32% significantly underperformed when compared to the industry average.

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