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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."

Capitala Finance

Dividend Yield: 13.60%

Capitala Finance

(NASDAQ:

CPTA

) shares currently have a dividend yield of 13.60%.

Capitala Finance Corp. is a Business Development Company specializing in investments in traditional mezzanine, senior subordinated and unitranche debt, second-lien loans, equity securities issued by lower and traditional middle-market companies, and small and middle-market companies. The company has a P/E ratio of 76.56.

The average volume for Capitala Finance has been 68,500 shares per day over the past 30 days. Capitala Finance has a market cap of $217.6 million and is part of the financial services industry. Shares are up 11.2% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Capitala Finance

TheStreet Recommends

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:

  • CPTA has underperformed the S&P 500 Index, declining 22.58% 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. When compared to other companies in the Capital Markets industry and the overall market, CAPITALA FINANCE CORP's return on equity is below that of both the industry average and the S&P 500.
  • The gross profit margin for CAPITALA FINANCE CORP is currently very high, coming in at 74.35%. 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 -53.88% is in-line with the industry average.
  • Net operating cash flow has significantly increased by 75.57% to -$10.88 million when compared to the same quarter last year. In addition, CAPITALA FINANCE CORP has also vastly surpassed the industry average cash flow growth rate of -2.34%.
  • CAPITALA FINANCE CORP has improved earnings per share by 33.7% 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, CAPITALA FINANCE CORP turned its bottom line around by earning $0.99 versus -$0.27 in the prior year. This year, the market expects an improvement in earnings ($1.88 versus $0.99).

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Apollo Residential Mortgage

Dividend Yield: 14.10%

Apollo Residential Mortgage

(NYSE:

AMTG

) shares currently have a dividend yield of 14.10%.

Apollo Residential Mortgage, Inc. primarily invests in residential mortgage assets in the United States.

The average volume for Apollo Residential Mortgage has been 478,900 shares per day over the past 30 days. Apollo Residential Mortgage has a market cap of $433.5 million and is part of the real estate industry. Shares are up 14.6% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Apollo Residential Mortgage

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 109.0% when compared to the same quarter one year ago, falling from $13.29 million to -$1.19 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, APOLLO RESIDENTIAL MTG INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $13.42 million or 19.38% 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.
  • The share price of APOLLO RESIDENTIAL MTG INC has not done very well: it is down 15.47% 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. 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.
  • APOLLO RESIDENTIAL MTG INC 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, APOLLO RESIDENTIAL MTG INC swung to a loss, reporting -$0.82 versus $2.54 in the prior year. This year, the market expects an improvement in earnings ($1.97 versus -$0.82).

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Five Oaks Investment

Dividend Yield: 11.90%

Five Oaks Investment

(NYSE:

OAKS

) shares currently have a dividend yield of 11.90%.

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 59,500 shares per day over the past 30 days. Five Oaks Investment has a market cap of $88.5 million and is part of the real estate industry. Shares are up 11.5% year-to-date as of the close of trading on Monday.

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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 disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

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, 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 -$0.78 million or 108.87% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • OAKS'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 43.91%, 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 gross profit margin for FIVE OAKS INVESTMENT CORP is currently very high, coming in at 83.39%. Regardless of OAKS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, OAKS's net profit margin of 13.29% is significantly lower than the industry average.
  • OAKS, with its decline in revenue, underperformed when compared the industry average of 8.1%. Since the same quarter one year prior, revenues fell by 10.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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