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."

Fifth Street Senior Floating Rate

Dividend Yield: 12.90%

Fifth Street Senior Floating Rate

(NASDAQ:

FSFR

) shares currently have a dividend yield of 12.90%.

Fifth Street Senior Floating Rate Corp. The company has a P/E ratio of 6.81.

The average volume for Fifth Street Senior Floating Rate has been 166,000 shares per day over the past 30 days. Fifth Street Senior Floating Rate has a market cap of $205.1 million and is part of the financial services industry. Shares are down 20.2% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Fifth Street Senior Floating Rate

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:

  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 28.76%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 96.15% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies 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 Capital Markets industry. The net income has significantly decreased by 93.6% when compared to the same quarter one year ago, falling from $4.51 million to $0.29 million.
  • FIFTH STREET SR FLTG RATE CP 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, FIFTH STREET SR FLTG RATE CP reported lower earnings of $0.54 versus $0.97 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus $0.54).
  • 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 Capital Markets industry and the overall market, FIFTH STREET SR FLTG RATE CP's return on equity is below that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 60.52% to -$32.46 million when compared to the same quarter last year. Despite an increase in cash flow of 60.52%, FIFTH STREET SR FLTG RATE CP is still growing at a significantly lower rate than the industry average of 276.16%.

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Birner Dental Management Services

Dividend Yield: 8.70%

Birner Dental Management Services

(NASDAQ:

BDMS

) shares currently have a dividend yield of 8.70%.

Birner Dental Management Services, Inc. provides business services to dental group practices in Colorado, New Mexico, and Arizona.

The average volume for Birner Dental Management Services has been 1,000 shares per day over the past 30 days. Birner Dental Management Services has a market cap of $18.8 million and is part of the diversified services industry. Shares are down 10.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Birner Dental Management Services

as a

sell

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

Highlights from the ratings report include:

  • The debt-to-equity ratio is very high at 4.38 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 0.21, 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 Health Care Providers & Services industry and the overall market, BIRNER DENTAL MGMT SVCS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for BIRNER DENTAL MGMT SVCS INC is rather low; currently it is at 20.39%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.43% trails that of the industry average.
  • BDMS'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 31.63%, 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.
  • BIRNER DENTAL MGMT SVCS INC has improved earnings per share by 45.5% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, BIRNER DENTAL MGMT SVCS INC swung to a loss, reporting -$0.49 versus $0.05 in the prior year.

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Communications Systems

Dividend Yield: 9.20%

Communications Systems

(NASDAQ:

JCS

) shares currently have a dividend yield of 9.20%.

Communications Systems, Inc., together with its subsidiaries, manufactures and sells modular connecting and wiring devices, digital subscriber line filters, structured wiring systems, and media and rate conversion products primarily in North America, Europe, the Middle East, and Africa.

The average volume for Communications Systems has been 6,500 shares per day over the past 30 days. Communications Systems has a market cap of $60.9 million and is part of the telecommunications industry. Shares are down 7.2% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Communications Systems

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, 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 underperformed when compared to that of the S&P 500 and the Communications Equipment industry average. The net income has decreased by 24.3% when compared to the same quarter one year ago, dropping from $1.70 million to $1.28 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. Compared to other companies in the Communications Equipment industry and the overall market, COMMUNICATIONS SYSTEMS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for COMMUNICATIONS SYSTEMS INC is currently lower than what is desirable, coming in at 34.86%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.98% significantly trails the industry average.
  • Net operating cash flow has significantly decreased to $0.20 million or 94.35% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Looking at the price performance of JCS's shares over the past 12 months, there is not much good news to report: the stock is down 34.22%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.

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