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."

Capstead Mortgage

Dividend Yield: 11.20%

Capstead Mortgage

(NYSE:

CMO

) shares currently have a dividend yield of 11.20%.

Capstead Mortgage Corporation operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 9.61.

The average volume for Capstead Mortgage has been 955,600 shares per day over the past 30 days. Capstead Mortgage has a market cap of $893.1 million and is part of the real estate industry. Shares are up 6.3% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Capstead Mortgage

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • CAPSTEAD MORTGAGE CORP's earnings per share declined by 16.1% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, CAPSTEAD MORTGAGE CORP reported lower earnings of $0.98 versus $1.33 in the prior year. For the next year, the market is expecting a contraction of 1.0% in earnings ($0.97 versus $0.98).
  • 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 15.3% when compared to the same quarter one year ago, dropping from $33.47 million to $28.36 million.
  • 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CAPSTEAD MORTGAGE CORP's return on equity is below that of both the industry average and the S&P 500.
  • Looking at the price performance of CMO's shares over the past 12 months, there is not much good news to report: the stock is down 27.43%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.
  • The gross profit margin for CAPSTEAD MORTGAGE CORP is currently very high, coming in at 93.47%. Regardless of CMO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CMO's net profit margin of 48.74% significantly outperformed against the industry.

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American Capital Agency

Dividend Yield: 14.20%

American Capital Agency

(NASDAQ:

AGNC

) shares currently have a dividend yield of 14.20%.

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

The average volume for American Capital Agency has been 3,341,200 shares per day over the past 30 days. American Capital Agency has a market cap of $5.9 billion and is part of the real estate industry. Shares are up 0.5% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

American Capital Agency

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:

  • AGNC has underperformed the S&P 500 Index, declining 21.58% 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.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN CAPITAL AGENCY CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for AMERICAN CAPITAL AGENCY CORP is currently very high, coming in at 91.22%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 156.38% significantly outperformed against the industry average.
  • AMERICAN CAPITAL AGENCY 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, AMERICAN CAPITAL AGENCY CORP turned its bottom line around by earning $0.56 versus -$0.73 in the prior year. This year, the market expects an improvement in earnings ($2.15 versus $0.56).

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Enbridge

Dividend Yield: 4.50%

Enbridge

(NYSE:

ENB

) shares currently have a dividend yield of 4.50%.

Enbridge Inc. operates as an energy transportation and distribution company in the United States and Canada. Its Liquids Pipelines segment operates common carrier and contract crude oil, natural gas liquids (NGL), and refined products pipelines and terminals. The company has a P/E ratio of 224.87.

The average volume for Enbridge has been 1,980,400 shares per day over the past 30 days. Enbridge has a market cap of $29.1 billion and is part of the energy industry. Shares are down 1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Enbridge

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 poor profit margins.

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 3735.7% when compared to the same quarter one year ago, falling from -$14.00 million to -$537.00 million.
  • The debt-to-equity ratio is very high at 2.26 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, ENBRIDGE INC underperformed against that of the industry average and is significantly less than that of 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 32.80%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 620.00% 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.
  • The gross profit margin for ENBRIDGE INC is currently extremely low, coming in at 10.19%. Regardless of ENB's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -6.45% trails the industry average.

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