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: 18.60%

Dynagas LNG Partners

(NYSE:

DLNG

) shares currently have a dividend yield of 18.60%.

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 5.56.

The average volume for Dynagas LNG Partners has been 100,900 shares per day over the past 30 days. Dynagas LNG Partners has a market cap of $186.0 million and is part of the transportation industry. Shares are down 42.3% year-to-date as of the close of trading on Wednesday.

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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 disappointing historical performance in the stock itself and generally high debt management risk.

Highlights from the ratings report include:

  • DLNG'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 44.28%, 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.
  • Currently the debt-to-equity ratio of 1.51 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 2.55, which shows the ability to cover short-term cash needs.
  • DYNAGAS LNG PARTNERS LP's earnings per share improvement from the most recent quarter was slightly positive. 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, DYNAGAS LNG PARTNERS LP increased its bottom line by earning $1.58 versus $0.62 in the prior year. This year, the market expects an improvement in earnings ($1.68 versus $1.58).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 14.6% when compared to the same quarter one year prior, going from $13.99 million to $16.04 million.
  • 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, DYNAGAS LNG PARTNERS LP's return on equity exceeds that of both the industry average and the S&P 500.

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Spark Energy

Dividend Yield: 7.50%

Spark Energy

(NASDAQ:

SPKE

) shares currently have a dividend yield of 7.50%.

Spark Energy, Inc., through its subsidiaries, operates as an independent retail energy services company in the United States. It operates through two segments, Retail Natural Gas and Retail Electricity. The company has a P/E ratio of 26.96.

The average volume for Spark Energy has been 33,600 shares per day over the past 30 days. Spark Energy has a market cap of $60.1 million and is part of the utilities industry. Shares are up 40.3% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Spark Energy

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and poor profit margins.

Highlights from the ratings report include:

  • The debt-to-equity ratio is very high at 4.52 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, SPKE maintains a poor quick ratio of 0.74, which illustrates the inability to avoid short-term cash problems.
  • The gross profit margin for SPARK ENERGY INC is rather low; currently it is at 16.22%. Regardless of SPKE's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SPKE's net profit margin of 1.43% is significantly lower than the industry average.
  • Looking at where the stock is today compared to one year ago, we find that it is higher, and it has outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • SPARK ENERGY INC's earnings per share declined by 11.4% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.64 versus -$2.19).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Electric Utilities industry average. The net income increased by 23.8% when compared to the same quarter one year prior, going from $1.06 million to $1.31 million.

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TransAlta

Dividend Yield: 16.30%

TransAlta

(NYSE:

TAC

) shares currently have a dividend yield of 16.30%.

TransAlta Corporation operates as a non-regulated electricity generation and energy marketing company in Canada, the United States, and Western Australia. The company's Generation segment owns and operates hydro, wind, and natural gas- and coal-fired facilities. The company has a P/E ratio of 6.64.

The average volume for TransAlta has been 243,400 shares per day over the past 30 days. TransAlta has a market cap of $931.6 million and is part of the utilities industry. Shares are down 61.1% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

TransAlta

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • Net operating cash flow has declined marginally to $200.00 million or 7.40% 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.
  • TAC'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 61.62%, 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.
  • 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 Independent Power Producers & Energy Traders industry and the overall market, TRANSALTA CORP's return on equity is below that of both the industry average and the S&P 500.
  • Even though the current debt-to-equity ratio is 1.29, it is still below the industry average, suggesting that this level of debt is acceptable within the Independent Power Producers & Energy Traders industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.73 is weak.
  • The gross profit margin for TRANSALTA CORP is rather high; currently it is at 52.42%. Regardless of TAC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TAC's net profit margin of 25.89% significantly outperformed against the industry.

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