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: 15.80%

Ellington Residential Mortgage REIT

(NYSE:

EARN

) shares currently have a dividend yield of 15.80%.

Ellington Residential Mortgage REIT, a real estate investment trust, specializes in acquiring, investing in, and managing residential mortgage-and real estate-related assets.

The average volume for Ellington Residential Mortgage REIT has been 53,500 shares per day over the past 30 days. Ellington Residential Mortgage REIT has a market cap of $104.3 million and is part of the real estate industry. Shares are down 7.3% 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, weak operating cash flow 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 236.3% when compared to the same quarter one year ago, falling from $3.53 million to -$4.82 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, ELLINGTON RESIDENTIAL MTG'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 -$3.89 million or 428.37% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much 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 33.07%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 235.89% compared to the year-earlier 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.
  • EARN, with its decline in revenue, slightly underperformed the industry average of 6.3%. Since the same quarter one year prior, revenues slightly dropped by 1.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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SunCoke Energy

Dividend Yield: 16.80%

SunCoke Energy

(NYSE:

SXC

) shares currently have a dividend yield of 16.80%.

SunCoke Energy, Inc. operates as an independent producer of coke in the Americas. The company offers metallurgical and thermal coal for use as a raw material in the blast furnace steelmaking process. It also provides coal handling and blending services.

The average volume for SunCoke Energy has been 1,242,200 shares per day over the past 30 days. SunCoke Energy has a market cap of $228.4 million and is part of the metals & mining industry. Shares are down 4.3% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

SunCoke Energy

as a

sell

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

Highlights from the ratings report include:

  • SXC'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 78.82%, 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 debt-to-equity ratio is very high at 3.45 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, SXC's quick ratio is somewhat strong at 1.21, demonstrating the ability to handle short-term liquidity needs.
  • The gross profit margin for SUNCOKE ENERGY INC is rather low; currently it is at 22.51%. Regardless of SXC's low profit margin, it has managed to increase from the same period last year.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, SUNCOKE ENERGY INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Despite the weak revenue results, SXC has significantly outperformed against the industry average of 46.8%. Since the same quarter one year prior, revenues slightly dropped by 6.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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Teekay Offshore Partners

Dividend Yield: 10.10%

Teekay Offshore Partners

(NYSE:

TOO

) shares currently have a dividend yield of 10.10%.

Teekay Offshore Partners L.P. provides marine transportation, oil production, storage, towage, and floating accommodation services to the offshore oil industry in the North Sea and Brazil. The company has a P/E ratio of 4.68.

The average volume for Teekay Offshore Partners has been 1,149,800 shares per day over the past 30 days. Teekay Offshore Partners has a market cap of $465.5 million and is part of the transportation industry. Shares are down 37% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Teekay Offshore Partners

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 291.9% when compared to the same quarter one year ago, falling from $28.52 million to -$54.74 million.
  • The debt-to-equity ratio is very high at 2.85 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.46, which clearly demonstrates the inability to cover short-term cash needs.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, TEEKAY OFFSHORE PARTNERS LP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 78.93%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 376.00% 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.
  • TEEKAY OFFSHORE PARTNERS LP 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, TEEKAY OFFSHORE PARTNERS LP swung to a loss, reporting -$0.22 versus $0.94 in the prior year. This year, the market expects an improvement in earnings ($0.91 versus -$0.22).

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