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 RateDividend Yield: 11.50%Fifth Street Senior Floating Rate (NASDAQ: FSFR) shares currently have a dividend yield of 11.50%. Fifth Street Senior Floating Rate Corp. The company has a P/E ratio of 7.83. The average volume for Fifth Street Senior Floating Rate has been 84,200 shares per day over the past 30 days. Fifth Street Senior Floating Rate has a market cap of $230.7 million and is part of the financial services industry. Shares are down 9.2% year-to-date as of the close of trading on Wednesday. EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE. TheStreet Ratings rates Fifth Street Senior Floating Rate as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, 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 Capital Markets industry. The net income has significantly decreased by 305.2% when compared to the same quarter one year ago, falling from $6.48 million to -$13.31 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 Capital Markets industry and the overall market on the basis of return on equity, FIFTH STREET SR FLTG RATE CP 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 27.70%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 304.54% 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.
  • 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 ($0.95 versus $0.54).
  • The gross profit margin for FIFTH STREET SR FLTG RATE CP is rather high; currently it is at 66.66%. Regardless of FSFR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FSFR's net profit margin of -95.63% significantly underperformed when compared to the industry average.

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KCAP Financial

Dividend Yield: 16.80%

KCAP Financial

(NASDAQ:

KCAP

) shares currently have a dividend yield of 16.80%. KCAP Financial, Inc. is a private equity and venture capital firm specializing in mid market, buyouts, and mezzanine investments. It focuses on mature and middle market companies. The average volume for KCAP Financial has been 111,800 shares per day over the past 30 days. KCAP Financial has a market cap of $132.6 million and is part of the financial services industry. Shares are down 14.5% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

KCAP Financial

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its 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:

  • 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 Capital Markets industry and the overall market, KCAP FINANCIAL INC's return on equity significantly trails that of both the industry average and 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 41.32%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 29.16% 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.
  • KCAP FINANCIAL INC's earnings per share declined by 29.2% in the most recent quarter compared to 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, KCAP FINANCIAL INC swung to a loss, reporting -$0.51 versus $0.43 in the prior year. This year, the market expects an improvement in earnings ($0.54 versus -$0.51).
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Capital Markets industry average, but is less than that of the S&P 500. The net income has significantly decreased by 29.1% when compared to the same quarter one year ago, falling from -$8.90 million to -$11.49 million.
  • Despite the weak revenue results, KCAP has outperformed against the industry average of 23.1%. Since the same quarter one year prior, revenues slightly dropped by 3.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

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Communications Systems

Dividend Yield: 9.80%

Communications Systems

(NASDAQ:

JCS

) shares currently have a dividend yield of 9.80%. Communications Systems, Inc., together with its subsidiaries, manufactures and sells connectivity infrastructure products, core media and rate conversion products, and IT solutions primarily in North America, Europe, the Middle East, and Africa. The average volume for Communications Systems has been 8,300 shares per day over the past 30 days. Communications Systems has a market cap of $57.1 million and is part of the telecommunications industry. Shares are down 15.6% year-to-date as of the close of trading on Wednesday.

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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, 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 Communications Equipment industry. The net income has significantly decreased by 457.3% when compared to the same quarter one year ago, falling from -$1.03 million to -$5.74 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 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 30.74%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -20.73% is significantly below that of the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 43.26%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 450.00% 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.
  • COMMUNICATIONS SYSTEMS INC 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, COMMUNICATIONS SYSTEMS INC swung to a loss, reporting -$1.11 versus $0.23 in the prior year. This year, the market expects an improvement in earnings (-$0.29 versus -$1.11).

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