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."

Great Ajax

Dividend Yield: 8.50%

Great Ajax

(NYSE:

AJX

) shares currently have a dividend yield of 8.50%.

Great Ajax Corp. focuses primarily on acquiring, investing in, and managing a portfolio of re-performing and non-performing mortgage loans secured by single-family residences and single-family properties. The company has a P/E ratio of 6.32.

The average volume for Great Ajax has been 39,500 shares per day over the past 30 days. Great Ajax has a market cap of $178.8 million and is part of the real estate industry. Shares are down 8.4% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Great Ajax

as a

sell

. The area that we feel has been the company's primary weakness has been its generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • AJX'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 25.09%, 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.
  • When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, GREAT AJAX CORP's return on equity is below that of both the industry average and the S&P 500.
  • The gross profit margin for GREAT AJAX CORP is currently very high, coming in at 79.26%. It has increased significantly from the same period last year. Along with this, the net profit margin of 50.41% significantly outperformed against the industry average.
  • GREAT AJAX CORP reported significant earnings per share improvement 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, GREAT AJAX CORP increased its bottom line by earning $1.62 versus $0.22 in the prior year. This year, the market expects an improvement in earnings ($2.42 versus $1.62).

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Hudson Global

Dividend Yield: 8.60%

Hudson Global

(NASDAQ:

HSON

) shares currently have a dividend yield of 8.60%.

Hudson Global, Inc. provides professional-level recruitment and related talent solutions for small to large-sized corporations and government agencies worldwide. The company has a P/E ratio of 50.00.

The average volume for Hudson Global has been 30,300 shares per day over the past 30 days. Hudson Global has a market cap of $80.3 million and is part of the diversified services industry. Shares are down 18.8% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Hudson Global

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:

  • HSON has underperformed the S&P 500 Index, declining 16.61% from its price level of one year ago. 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'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 Professional Services industry and the overall market, HUDSON GLOBAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The revenue fell significantly faster than the industry average of 5.8%. Since the same quarter one year prior, revenues fell by 26.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 41.03% is the gross profit margin for HUDSON GLOBAL INC which we consider to be strong. 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 -1.89% is in-line with the industry average.
  • Net operating cash flow has significantly increased by 299.09% to $4.83 million when compared to the same quarter last year. In addition, HUDSON GLOBAL INC has also vastly surpassed the industry average cash flow growth rate of 1.50%.

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Ellington Residential Mortgage REIT

Dividend Yield: 14.80%

Ellington Residential Mortgage REIT

(NYSE:

EARN

) shares currently have a dividend yield of 14.80%.

Ellington Residential Mortgage REIT, a real estate investment trust, specializes in acquiring, investing in, and managing residential mortgage-and real estate-related assets.

The average volume for Ellington Residential Mortgage REIT has been 47,800 shares per day over the past 30 days. Ellington Residential Mortgage REIT has a market cap of $110.8 million and is part of the real estate industry. Shares are down 1.5% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Ellington Residential Mortgage REIT

as a

sell

. Among the areas we feel are negative, one of the most important has been an overall disappointing return on equity.

Highlights from the ratings report include:

  • 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, ELLINGTON RESIDENTIAL MTG's return on equity significantly trails that of both the industry average and the S&P 500.
  • EARN, with its decline in revenue, underperformed when compared the industry average of 7.9%. Since the same quarter one year prior, revenues fell by 21.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Compared to where it was trading one year ago, EARN is down 28.43% to its most recent closing price of 12.06. Looking ahead, our view is that this stock still does not have good upside potential and may even suffer further declines.
  • ELLINGTON RESIDENTIAL MTG 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, ELLINGTON RESIDENTIAL MTG reported lower earnings of $0.00 versus $1.77 in the prior year. This year, the market expects an increase in earnings to $2.10 from $0.00.
  • The gross profit margin for ELLINGTON RESIDENTIAL MTG is currently very high, coming in at 87.22%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, EARN's net profit margin of 10.50% significantly trails the industry average.

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