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."

KNOT Offshore Partners

Dividend Yield: 17.20%

KNOT Offshore Partners

(NYSE:

KNOP

) shares currently have a dividend yield of 17.20%.

KNOT Offshore Partners LP owns and operates shuttle tankers under long-term charters in the North Sea and Brazil. The company provides crude oil loading, transportation, and storage services under time charters and bareboat charters. The company has a P/E ratio of 11.39.

The average volume for KNOT Offshore Partners has been 132,100 shares per day over the past 30 days. KNOT Offshore Partners has a market cap of $270.1 million and is part of the transportation industry. Shares are down 5.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

KNOT Offshore Partners

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 and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • The debt-to-equity ratio of 1.17 is relatively high when compared with the industry average, suggesting a need for better debt level management.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, KNOT OFFSHORE PRTNRS LP has outperformed in comparison with the industry average, but has underperformed when compared to 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 51.44%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 43.85% 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.
  • 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 29.9% when compared to the same quarter one year ago, falling from $12.56 million to $8.80 million.
  • KNOT OFFSHORE PRTNRS LP's earnings per share declined by 43.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, KNOT OFFSHORE PRTNRS LP increased its bottom line by earning $1.34 versus $0.87 in the prior year. This year, the market expects an improvement in earnings ($1.41 versus $1.34).

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Independence Realty

Dividend Yield: 11.60%

Independence Realty

(AMEX:

IRT

) shares currently have a dividend yield of 11.60%.

Independence Realty Trust, Inc is an equity real estate investment trust launched by RAIT Financial Trust. It is managed by Independence Realty Advisors, LLC. The fund invests in the real estate markets of the United States. It makes investments in apartment properties to create its portfolio. The company has a P/E ratio of 8.41.

The average volume for Independence Realty has been 212,800 shares per day over the past 30 days. Independence Realty has a market cap of $292.8 million and is part of the real estate industry. Shares are down 17.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Independence Realty

as a

sell

. Among the areas we feel are negative, one of the most important has been weak operating cash flow.

Highlights from the ratings report include:

  • Net operating cash flow has significantly decreased to -$8.35 million or 280.98% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, INDEPENDENCE REALTY TRUST's return on equity is below that of both the industry average and the S&P 500.
  • This stock's share value has moved by only 33.62% over the past year. 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 gross profit margin for INDEPENDENCE REALTY TRUST is currently lower than what is desirable, coming in at 29.80%. Regardless of IRT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, IRT's net profit margin of 94.13% significantly outperformed against the industry.

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Teekay Offshore Partners

Dividend Yield: 15.80%

Teekay Offshore Partners

(NYSE:

TOO

) shares currently have a dividend yield of 15.80%.

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 3.00.

The average volume for Teekay Offshore Partners has been 1,260,400 shares per day over the past 30 days. Teekay Offshore Partners has a market cap of $298.5 million and is part of the transportation industry. Shares are down 54.6% 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 87.12%, 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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