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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."

Spark Energy

Dividend Yield: 8.50%

Spark Energy

(NASDAQ:

SPKE

) shares currently have a dividend yield of 8.50%.

Spark Energy, Inc., through its subsidiaries, operates as an independent retail energy services company in the United States. It operates through two segments, Retail Natural Gas and Retail Electricity. The company has a P/E ratio of 21.74.

The average volume for Spark Energy has been 26,500 shares per day over the past 30 days. Spark Energy has a market cap of $52.5 million and is part of the utilities industry. Shares are up 20.4% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Spark Energy

TheStreet Recommends

as a

sell

. Among the areas we feel are negative, one of the most important has been poor profit margins.

Highlights from the ratings report include:

  • The gross profit margin for SPARK ENERGY INC is rather low; currently it is at 15.79%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, SPKE's net profit margin of 1.08% is significantly lower than the industry average.
  • SPKE, with its decline in revenue, slightly underperformed the industry average of 0.5%. Since the same quarter one year prior, revenues slightly dropped by 0.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.84, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.85 is somewhat weak and could be cause for future problems.
  • After a year of stock price fluctuations, the net result is that SPKE's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Regardless of the rise in share value over the previous year, we feel that the risks involved in investing in this stock do not compensate for any future upside potential.
  • SPARK ENERGY INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.55 versus -$2.19).

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Gladstone Commercial

Dividend Yield: 9.40%

Gladstone Commercial

(NASDAQ:

GOOD

) shares currently have a dividend yield of 9.40%.

Gladstone Commercial Corporation operates as a real estate investment trust (REIT) in the United States. It engages in investing in and owning net leased industrial and commercial real properties, and making long-term industrial and commercial mortgage loans. The company has a P/E ratio of 84.26.

The average volume for Gladstone Commercial has been 118,900 shares per day over the past 30 days. Gladstone Commercial has a market cap of $353.3 million and is part of the real estate industry. Shares are down 6.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Gladstone Commercial

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, unimpressive growth in net income and feeble growth in its earnings per share.

Highlights from the ratings report include:

  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, GOOD has underperformed the S&P 500 Index, declining 9.70% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • 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 141.1% when compared to the same quarter one year ago, falling from $0.23 million to -$0.10 million.
  • GLADSTONE COMMERCIAL CORP's earnings per share declined by 20.0% 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GLADSTONE COMMERCIAL CORP reported poor results of -$0.61 versus -$0.22 in the prior year. This year, the market expects an improvement in earnings (-$0.05 versus -$0.61).
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, GLADSTONE COMMERCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • 40.43% is the gross profit margin for GLADSTONE COMMERCIAL CORP which we consider to be strong. Regardless of GOOD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GOOD's net profit margin of -0.44% significantly underperformed when compared to the industry average.

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AdCare Health Systems

Dividend Yield: 7.50%

AdCare Health Systems

(AMEX:

ADK

) shares currently have a dividend yield of 7.50%.

AdCare Health Systems, Inc., through its subsidiaries, owns, operates, and manages skilled nursing facilities and assisted living facilities in the states of Arkansas, Georgia, North Carolina, Ohio, Oklahoma, and South Carolina.

The average volume for AdCare Health Systems has been 26,500 shares per day over the past 30 days. AdCare Health Systems has a market cap of $63.4 million and is part of the health services industry. Shares are down 18.9% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

AdCare Health Systems

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, weak operating cash flow, poor profit margins 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 Health Care Providers & Services industry. The net income has significantly decreased by 93.1% when compared to the same quarter one year ago, falling from -$2.64 million to -$5.09 million.
  • The debt-to-equity ratio is very high at 3.14 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, ADK maintains a poor quick ratio of 0.78, which illustrates the inability to avoid short-term cash problems.
  • Net operating cash flow has significantly decreased to -$8.07 million or 203.11% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for ADCARE HEALTH SYSTEMS INC is rather low; currently it is at 19.43%. Regardless of ADK's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, ADK's net profit margin of -21.83% significantly underperformed when compared to the industry average.
  • ADK has underperformed the S&P 500 Index, declining 23.51% 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.

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