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: 13.10%

Capitala Finance

(NASDAQ:

CPTA

) shares currently have a dividend yield of 13.10%.

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 79.89.

The average volume for Capitala Finance has been 61,700 shares per day over the past 30 days. Capitala Finance has a market cap of $227.6 million and is part of the financial services industry. Shares are up 20.6% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Capitala Finance

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity 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 Capital Markets industry. The net income has significantly decreased by 142.4% when compared to the same quarter one year ago, falling from $9.87 million to -$4.19 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. Compared to other companies in the Capital Markets industry and the overall market, CAPITALA FINANCE CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The share price of CAPITALA FINANCE CORP has not done very well: it is down 14.79% 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.
  • CAPITALA FINANCE CORP 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. 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, 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).
  • The gross profit margin for CAPITALA FINANCE CORP is currently very high, coming in at 71.32%. 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 -24.00% is in-line with the industry average.

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Fortress Transportation and Infrastructure

Dividend Yield: 13.90%

Fortress Transportation and Infrastructure

(NYSE:

FTAI

) shares currently have a dividend yield of 13.90%.

Fortress Transportation and Infrastructure Investors LLC owns and acquires infrastructure and related equipment for the transportation of goods and people in Africa, Asia, Europe, South America, and North America.

The average volume for Fortress Transportation and Infrastructure has been 176,300 shares per day over the past 30 days. Fortress Transportation and Infrastructure has a market cap of $719.4 million and is part of the diversified services industry. Shares are down 15.4% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Fortress Transportation and Infrastructure

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 Trading Companies & Distributors industry. The net income has significantly decreased by 206.1% when compared to the same quarter one year ago, falling from $5.45 million to -$5.78 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. Compared to other companies in the Trading Companies & Distributors industry and the overall market, FORTRESS TRANS INFRASTR INVS'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 -$3.80 million or 161.05% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • FORTRESS TRANS INFRASTR INVS 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, FORTRESS TRANS INFRASTR INVS swung to a loss, reporting -$0.16 versus $0.10 in the prior year. This year, the market expects an improvement in earnings (-$0.01 versus -$0.16).
  • FTAI, with its decline in revenue, slightly underperformed the industry average of 2.4%. Since the same quarter one year prior, revenues slightly dropped by 7.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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Arc Logistics Partners

Dividend Yield: 13.30%

Arc Logistics Partners

(NYSE:

ARCX

) shares currently have a dividend yield of 13.30%.

Arc Logistics Partners LP engages in the terminalling, storage, throughput, and transloading of crude oil and petroleum products. The company has a P/E ratio of 24.57.

The average volume for Arc Logistics Partners has been 35,900 shares per day over the past 30 days. Arc Logistics Partners has a market cap of $254.8 million and is part of the energy industry. Shares are down 0.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Arc Logistics 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:

  • ARCX has underperformed the S&P 500 Index, declining 23.10% 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.
  • ARCX's debt-to-equity ratio of 0.63 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 1.13 is sturdy.
  • 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ARC LOGISTICS PARTNERS LP's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The gross profit margin for ARC LOGISTICS PARTNERS LP is rather high; currently it is at 66.67%. It has increased significantly from the same period last year. Along with this, the net profit margin of 11.95% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 131.72% to $12.52 million when compared to the same quarter last year. In addition, ARC LOGISTICS PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -49.80%.

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