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."

Ellington Residential Mortgage REIT

Dividend Yield: 13.50%

Ellington Residential Mortgage REIT

(NYSE:

EARN

) shares currently have a dividend yield of 13.50%.

Ellington Residential Mortgage REIT, a real estate investment trust, specializes in acquiring, investing in, and managing residential mortgage-and real estate-related assets. The company has a P/E ratio of 19.59.

The average volume for Ellington Residential Mortgage REIT has been 48,100 shares per day over the past 30 days. Ellington Residential Mortgage REIT has a market cap of $121.9 million and is part of the real estate industry. Shares are down 18.7% year-to-date as of the close of trading on Tuesday.

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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 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 98.3% when compared to the same quarter one year ago, falling from $11.05 million to $0.19 million.
  • 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. 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.
  • The share price of ELLINGTON RESIDENTIAL MTG has not done very well: it is down 23.47% 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.
  • EARN, with its decline in revenue, underperformed when compared the industry average of 9.7%. Since the same quarter one year prior, revenues fell by 15.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for ELLINGTON RESIDENTIAL MTG is currently very high, coming in at 87.15%. 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 1.93% is significantly lower than the industry average.

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Gladstone Commercial

Dividend Yield: 10.60%

Gladstone Commercial

(NASDAQ:

GOOD

) shares currently have a dividend yield of 10.60%.

Gladstone Commercial Corporation operates as a real estate investment trust (REIT) in the United States. It engages in investing in and owning net leased industrial and commercial real properties, and making long-term industrial and commercial mortgage loans. The company has a P/E ratio of 64.55.

The average volume for Gladstone Commercial has been 97,800 shares per day over the past 30 days. Gladstone Commercial has a market cap of $303.3 million and is part of the real estate industry. Shares are down 18.5% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Gladstone Commercial

as a

sell

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

Highlights from the ratings report include:

  • The share price of GLADSTONE COMMERCIAL CORP has not done very well: it is down 20.37% 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. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • 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 64.6% when compared to the same quarter one year ago, falling from $1.22 million to $0.43 million.
  • GLADSTONE COMMERCIAL 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. 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, GLADSTONE COMMERCIAL CORP reported poor results of -$0.61 versus -$0.22 in the prior year. This year, the market expects an improvement in earnings (-$0.05 versus -$0.61).
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, GLADSTONE COMMERCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • 39.12% is the gross profit margin for GLADSTONE COMMERCIAL CORP which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, GOOD's net profit margin of 2.08% significantly trails the industry average.

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Enable Midstream Partners

Dividend Yield: 9.10%

Enable Midstream Partners

(NYSE:

ENBL

) shares currently have a dividend yield of 9.10%.

Enable Midstream Partners, LP owns, operates, and develops natural gas and crude oil infrastructure assets in the United States. It operates through two segments, Gathering and Processing, and Transportation and Storage. The company has a P/E ratio of 9.36.

The average volume for Enable Midstream Partners has been 186,500 shares per day over the past 30 days. Enable Midstream Partners has a market cap of $3.0 billion and is part of the energy industry. Shares are down 27% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Enable Midstream Partners

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow, generally disappointing historical performance in the stock itself, poor profit margins and feeble growth in its earnings per share.

Highlights from the ratings report include:

  • Net operating cash flow has decreased to $96.00 million or 48.38% 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.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 45.77%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 37.93% 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 ENABLE MIDSTREAM PARTNERS LP is currently lower than what is desirable, coming in at 28.64%. Regardless of ENBL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, ENBL's net profit margin of 13.05% compares favorably to the industry average.
  • ENABLE MIDSTREAM PARTNERS LP's earnings per share declined by 37.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ENABLE MIDSTREAM PARTNERS LP increased its bottom line by earning $1.27 versus $0.28 in the prior year. For the next year, the market is expecting a contraction of 32.3% in earnings ($0.86 versus $1.27).
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 35.8% when compared to the same quarter one year ago, falling from $120.00 million to $77.00 million.

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