Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer

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."

Dynagas LNG Partners

Dividend Yield: 8.20%

Dynagas LNG Partners

(NYSE:

DLNG

) shares currently have a dividend yield of 8.20%.

Dynagas LNG Partners LP, through its subsidiaries, operates in the seaborne transportation industry worldwide. The company owns and operates liquefied natural gas (LNG) vessels. The company has a P/E ratio of 13.08.

The average volume for Dynagas LNG Partners has been 88,600 shares per day over the past 30 days. Dynagas LNG Partners has a market cap of $423.6 million and is part of the transportation industry. Shares are up 24.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Dynagas LNG Partners

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • Currently the debt-to-equity ratio of 1.93 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.39, which clearly demonstrates the inability to cover short-term cash needs.
  • DLNG has underperformed the S&P 500 Index, declining 10.50% from its price level of one year ago. 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 DYNAGAS LNG PARTNERS LP is currently very high, coming in at 82.64%. Regardless of DLNG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DLNG's net profit margin of 42.11% significantly outperformed against the industry.
  • Net operating cash flow has significantly increased by 163.85% to $20.61 million when compared to the same quarter last year. In addition, DYNAGAS LNG PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -11.68%.
  • Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, DYNAGAS LNG PARTNERS LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

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Ellington Residential Mortgage REIT

Dividend Yield: 13.20%

Ellington Residential Mortgage REIT

(NYSE:

EARN

) shares currently have a dividend yield of 13.20%.

No company description available. The company has a P/E ratio of 9.45.

The average volume for Ellington Residential Mortgage REIT has been 55,500 shares per day over the past 30 days. Ellington Residential Mortgage REIT has a market cap of $153.0 million and is part of the real estate industry. Shares are up 3.6% 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

. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 840.8% when compared to the same quarter one year ago, falling from -$0.13 million to -$1.18 million.
  • The share price of ELLINGTON RESIDENTIAL MTG has not done very well: it is down 6.17% 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.
  • The gross profit margin for ELLINGTON RESIDENTIAL MTG is currently very high, coming in at 85.20%. Regardless of EARN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EARN's net profit margin of -9.96% significantly underperformed when compared to the industry average.
  • EARN, with its decline in revenue, underperformed when compared the industry average of 10.1%. Since the same quarter one year prior, revenues slightly dropped by 2.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ELLINGTON RESIDENTIAL MTG's return on equity is below that of both the industry average and the S&P 500.

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Midcoast Energy Partners

Dividend Yield: 10.00%

Midcoast Energy Partners

(NYSE:

MEP

) shares currently have a dividend yield of 10.00%.

Midcoast Energy Partners, L.P. engages in gathering, processing, treating, transporting, and marketing natural gas and natural gas liquids (NGL) in the United States. It operates through two segments, Gathering, Processing, and Transportation; and Logistics and Marketing. The company has a P/E ratio of 9.83.

The average volume for Midcoast Energy Partners has been 134,300 shares per day over the past 30 days. Midcoast Energy Partners has a market cap of $308.9 million and is part of the energy industry. Shares are up 1.6% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Midcoast Energy Partners

as a

sell

. Among the areas we feel are negative, one of the most important has been poor profit margins.

Highlights from the ratings report include:

  • The gross profit margin for MIDCOAST ENERGY PARTNERS LP is currently extremely low, coming in at 12.71%. Regardless of MEP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, MEP's net profit margin of 4.27% compares favorably to the industry average.
  • MIDCOAST ENERGY PARTNERS LP 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, MIDCOAST ENERGY PARTNERS LP increased its bottom line by earning $1.40 versus $0.21 in the prior year. For the next year, the market is expecting a contraction of 70.7% in earnings ($0.41 versus $1.40).
  • Despite the weak revenue results, MEP has outperformed against the industry average of 19.6%. Since the same quarter one year prior, revenues slightly dropped by 6.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that MEP's debt-to-equity ratio is low, the quick ratio, which is currently 0.52, displays a potential problem in covering short-term cash needs.
  • Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MIDCOAST ENERGY PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.

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