What To Sell: 3 Sell-Rated Dividend Stocks SPP, IEP, MTGE

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 27,100 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 27.3% year-to-date as of the close of trading on Friday.

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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 39.42%, 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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Icahn

Dividend Yield: 11.20%

Icahn (NASDAQ: IEP) shares currently have a dividend yield of 11.20%.

Icahn Enterprises L.P., through its subsidiaries, operates in investment, automotive, energy, metals, railcar, gaming, mining, food packaging, real estate, and home fashion businesses in the United States, Germany, and Internationally.

The average volume for Icahn has been 96,300 shares per day over the past 30 days. Icahn has a market cap of $7.2 billion and is part of the conglomerates industry. Shares are down 12.7% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Icahn 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 Industrial Conglomerates industry. The net income has significantly decreased by 619.9% when compared to the same quarter one year ago, falling from $161.00 million to -$837.00 million.
  • The debt-to-equity ratio is very high at 5.40 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • 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 Industrial Conglomerates industry and the overall market, ICAHN ENTERPRISES 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 33.74%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 588.97% 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.
  • ICAHN ENTERPRISES 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, ICAHN ENTERPRISES LP reported poor results of -$9.01 versus -$2.92 in the prior year. This year, the market expects an improvement in earnings (-$2.85 versus -$9.01).

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American Capital Mortgage Investment

Dividend Yield: 9.80%

American Capital Mortgage Investment (NASDAQ: MTGE) shares currently have a dividend yield of 9.80%.

American Capital Mortgage Investment Corp. operates as a real estate investment trust (REIT) in the United States.

The average volume for American Capital Mortgage Investment has been 474,100 shares per day over the past 30 days. American Capital Mortgage Investment has a market cap of $750.9 million and is part of the real estate industry. Shares are up 17.2% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates American Capital Mortgage 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 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 168.6% when compared to the same quarter one year ago, falling from $31.06 million to -$21.30 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 Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN CAPITAL MTG INV CP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $23.90 million or 18.87% when compared to the same quarter last year. Despite a decrease in cash flow AMERICAN CAPITAL MTG INV CP is still fairing well by exceeding its industry average cash flow growth rate of -65.75%.
  • AMERICAN CAPITAL MTG INV CP 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, AMERICAN CAPITAL MTG INV CP swung to a loss, reporting -$0.84 versus $3.06 in the prior year. This year, the market expects an improvement in earnings ($1.73 versus -$0.84).
  • MTGE, with its decline in revenue, underperformed when compared the industry average of 10.4%. Since the same quarter one year prior, revenues fell by 16.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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