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."

Rait Financial

Dividend Yield: 14.80%

Rait Financial

(NYSE:

RAS

) shares currently have a dividend yield of 14.80%.

RAIT Financial Trust operates as a self-managed and self-advised real estate investment trust (REIT). The company, through its subsidiaries, invests in, manages, and services real estate-related assets with a focus on commercial real estate. The company has a P/E ratio of 30.38.

The average volume for Rait Financial has been 1,317,900 shares per day over the past 30 days. Rait Financial has a market cap of $221.7 million and is part of the real estate industry. Shares are down 6.3% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Rait Financial

as a

sell

. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • RAS'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 66.30%, 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 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 Real Estate Investment Trusts (REITs) industry and the overall market, RAIT FINANCIAL TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
  • 38.94% is the gross profit margin for RAIT FINANCIAL TRUST which we consider to be strong. Regardless of RAS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RAS's net profit margin of 10.16% is significantly lower than the industry average.
  • RAIT FINANCIAL TRUST 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, RAIT FINANCIAL TRUST turned its bottom line around by earning $0.08 versus -$3.88 in the prior year. For the next year, the market is expecting a contraction of 537.5% in earnings (-$0.35 versus $0.08).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 104.2% when compared to the same quarter one year prior, rising from -$246.64 million to $10.28 million.

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Apollo Residential Mortgage

Dividend Yield: 18.90%

Apollo Residential Mortgage

(NYSE:

AMTG

) shares currently have a dividend yield of 18.90%.

Apollo Residential Mortgage, Inc. primarily invests in residential mortgage assets in the United States.

The average volume for Apollo Residential Mortgage has been 372,100 shares per day over the past 30 days. Apollo Residential Mortgage has a market cap of $321.9 million and is part of the real estate industry. Shares are up 8.1% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Apollo Residential Mortgage

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, 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 300.2% when compared to the same quarter one year ago, falling from $10.88 million to -$21.78 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, APOLLO RESIDENTIAL MTG INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $12.00 million or 10.99% when compared to the same quarter last year. Despite a decrease in cash flow of 10.99%, APOLLO RESIDENTIAL MTG INC is still significantly exceeding the industry average of -69.51%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 35.62%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 443.47% 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.
  • APOLLO RESIDENTIAL MTG 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, APOLLO RESIDENTIAL MTG INC turned its bottom line around by earning $2.54 versus -$1.91 in the prior year. For the next year, the market is expecting a contraction of 16.9% in earnings ($2.11 versus $2.54).

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Ellington Residential Mortgage REIT

Dividend Yield: 15.10%

Ellington Residential Mortgage REIT

(NYSE:

EARN

) shares currently have a dividend yield of 15.10%.

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 51,000 shares per day over the past 30 days. Ellington Residential Mortgage REIT has a market cap of $108.9 million and is part of the real estate industry. Shares are down 2.8% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Ellington Residential Mortgage REIT

as a

sell

. Among the areas we feel are negative, one of the most important has been an overall disappointing return on equity.

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 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.
  • EARN, with its decline in revenue, underperformed when compared the industry average of 7.3%. Since the same quarter one year prior, revenues fell by 21.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Compared to where it was trading one year ago, EARN is down 26.83% to its most recent closing price of 11.92. Looking ahead, our view is that this stock still does not have good upside potential and may even suffer further declines.
  • ELLINGTON RESIDENTIAL MTG reported significant earnings per share improvement 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, ELLINGTON RESIDENTIAL MTG reported lower earnings of $0.00 versus $1.77 in the prior year. This year, the market expects an increase in earnings to $2.13 from $0.00.
  • The gross profit margin for ELLINGTON RESIDENTIAL MTG is currently very high, coming in at 87.22%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, EARN's net profit margin of 10.50% significantly trails the industry average.

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