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."

National Oilwell Varco

Dividend Yield: 6.40%

National Oilwell Varco

(NYSE:

NOV

) shares currently have a dividend yield of 6.40%.

National Oilwell Varco, Inc. designs, manufactures, and sells equipment and components used in oil and gas drilling, completion, and production operations; and provides oilfield services to the upstream oil and gas industry worldwide.

The average volume for National Oilwell Varco has been 7,299,800 shares per day over the past 30 days. National Oilwell Varco has a market cap of $10.7 billion and is part of the energy industry. Shares are down 12.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

National Oilwell Varco

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 significantly underperformed when compared to that of the S&P 500 and the Energy Equipment & Services industry. The net income has significantly decreased by 356.0% when compared to the same quarter one year ago, falling from $595.00 million to -$1,523.00 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 Energy Equipment & Services industry and the overall market on the basis of return on equity, NATIONAL OILWELL VARCO INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The gross profit margin for NATIONAL OILWELL VARCO INC is currently lower than what is desirable, coming in at 25.83%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -55.95% is significantly below that of the industry average.
  • Net operating cash flow has decreased to $614.00 million or 16.57% when compared to the same quarter last year. Despite a decrease in cash flow of 16.57%, NATIONAL OILWELL VARCO INC is still significantly exceeding the industry average of -86.93%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 46.27%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 392.08% 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.

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Tronox

Dividend Yield: 12.90%

Tronox

(NYSE:

TROX

) shares currently have a dividend yield of 12.90%.

Tronox Limited produces and markets titanium bearing mineral sands and titanium dioxide (TiO2) pigment in North America, Europe, South Africa, and the Asia-Pacific region. It primarily operates in two segments, TiO2 and Alkali. The company has a P/E ratio of 2.82.

The average volume for Tronox has been 1,198,100 shares per day over the past 30 days. Tronox has a market cap of $897.1 million and is part of the chemicals industry. Shares are up 97.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Tronox

as a

sell

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

Highlights from the ratings report include:

  • 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 Chemicals industry and the overall market, TRONOX LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for TRONOX LTD is rather low; currently it is at 18.32%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -16.82% is significantly below that of the industry average.
  • The debt-to-equity ratio is very high at 3.13 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, TROX's quick ratio is somewhat strong at 1.14, demonstrating the ability to handle short-term liquidity needs.
  • TROX'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 63.14%, 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.
  • TRONOX LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, TRONOX LTD continued to lose money by earning -$2.75 versus -$3.73 in the prior year. This year, the market expects an improvement in earnings (-$1.25 versus -$2.75).

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Euronav

Dividend Yield: 14.70%

Euronav

(NYSE:

EURN

) shares currently have a dividend yield of 14.70%.

Euronav NV, together with its subsidiaries, owns, operates, and manages a fleet of vessels for the ocean transportation and storage of crude oil and petroleum products worldwide. The company operates through two segments, Tankers; and Floating Production, Storage, and Offloading Operations.

The average volume for Euronav has been 1,109,200 shares per day over the past 30 days. Euronav has a market cap of $1.8 billion and is part of the transportation industry. Shares are down 18.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Euronav

as a

sell

. The area that we feel has been the company's primary weakness has been its feeble growth in its earnings per share.

Highlights from the ratings report include:

  • EURONAV reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, EURONAV turned its bottom line around by earning $2.21 versus -$0.28 in the prior year. For the next year, the market is expecting a contraction of 19.7% in earnings ($1.78 versus $2.21).
  • EURN has underperformed the S&P 500 Index, declining 20.12% from its price level of one year ago.
  • Despite currently having a low debt-to-equity ratio of 0.55, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that EURN's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.84 is high and demonstrates strong liquidity.
  • 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, EURONAV's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • The gross profit margin for EURONAV is currently very high, coming in at 73.01%. It has increased significantly from the same period last year. Along with this, the net profit margin of 46.23% significantly outperformed against the industry average.

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