Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer

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."

SeaWorld Entertainment

Dividend Yield: 4.20%

SeaWorld Entertainment

(NYSE:

SEAS

) shares currently have a dividend yield of 4.20%.

SeaWorld Entertainment, Inc. operates as a theme park and entertainment company in the United States. The company has a P/E ratio of 34.93.

The average volume for SeaWorld Entertainment has been 1,201,700 shares per day over the past 30 days. SeaWorld Entertainment has a market cap of $1.8 billion and is part of the leisure industry. Shares are up 9.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

SeaWorld Entertainment

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, 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 Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 96.2% when compared to the same quarter one year ago, falling from -$12.97 million to -$25.45 million.
  • The debt-to-equity ratio is very high at 2.77 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 0.37, which clearly demonstrates the inability to cover short-term cash needs.
  • The gross profit margin for SEAWORLD ENTERTAINMENT INC is currently lower than what is desirable, coming in at 28.15%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -9.61% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$8.41 million or 162.38% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 40.84%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 107.14% 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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New Residential Investment

Dividend Yield: 10.10%

New Residential Investment

(NYSE:

NRZ

) shares currently have a dividend yield of 10.10%.

New Residential Investment Corp., a real estate investment trust (REIT), focuses on investing in and managing residential mortgage related assets. It operates through Servicing Related Assets, Residential Securities and Loans, and Other Investments segments. The company has a P/E ratio of 5.93.

The average volume for New Residential Investment has been 1,415,900 shares per day over the past 30 days. New Residential Investment has a market cap of $2.1 billion and is part of the real estate industry. Shares are up 18.1% year-to-date as of the close of trading on Wednesday.

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TheStreet Recommends

TheStreet Ratings rates

New Residential Investment

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income 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 32.6% when compared to the same quarter one year ago, falling from $80.51 million to $54.23 million.
  • NEW RESIDENTIAL INV CP's earnings per share declined by 40.3% in the most recent quarter compared to 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, NEW RESIDENTIAL INV CP increased its bottom line by earning $2.51 versus $1.96 in the prior year. For the next year, the market is expecting a contraction of 25.9% in earnings ($1.86 versus $2.51).
  • The gross profit margin for NEW RESIDENTIAL INV CP is rather high; currently it is at 61.15%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, NRZ's net profit margin of 43.46% compares favorably to the industry average.
  • Compared to where it was a year ago, the stock is now trading at a higher level, and has traded in line with the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.

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ARMOUR Residential REIT

Dividend Yield: 15.00%

ARMOUR Residential REIT

(NYSE:

ARR

) shares currently have a dividend yield of 15.00%.

ARMOUR Residential REIT, Inc. invests in and manages a portfolio of residential mortgage backed securities in the United States. The company is managed by ARMOUR Residential Management LLC.

The average volume for ARMOUR Residential REIT has been 3,599,500 shares per day over the past 30 days. ARMOUR Residential REIT has a market cap of $1.1 billion and is part of the real estate industry. Shares are down 13.3% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

ARMOUR Residential REIT

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, ARMOUR RESIDENTIAL REIT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • ARR has underperformed the S&P 500 Index, declining 24.59% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The gross profit margin for ARMOUR RESIDENTIAL REIT INC is currently very high, coming in at 91.13%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, ARR's net profit margin of -136.87% significantly underperformed when compared to the industry average.
  • ARMOUR RESIDENTIAL REIT INC 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, ARMOUR RESIDENTIAL REIT INC reported poor results of -$0.55 versus -$0.53 in the prior year. This year, the market expects an improvement in earnings ($0.41 versus -$0.55).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 73.5% when compared to the same quarter one year prior, rising from -$540.78 million to -$143.17 million.

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