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."

Sprague Resources

Dividend Yield: 9.00%

Sprague Resources

(NYSE:

SRLP

) shares currently have a dividend yield of 9.00%.

Sprague Resources LP engages in the purchase, storage, distribution, and sale of refined petroleum products and natural gas in the United States. The company operates through four segments: Refined Products, Natural Gas, Materials Handling, and Other Operations. The company has a P/E ratio of 7.99.

The average volume for Sprague Resources has been 49,500 shares per day over the past 30 days. Sprague Resources has a market cap of $505.8 million and is part of the energy industry. Shares are up 17.8% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Sprague Resources

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, generally high debt management risk, generally disappointing historical performance in the stock itself, weak operating cash flow and poor profit margins.

Highlights from the ratings report include:

  • SPRAGUE RESOURCES LP's earnings per share declined by 33.2% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, SPRAGUE RESOURCES LP reported lower earnings of $3.69 versus $6.07 in the prior year. For the next year, the market is expecting a contraction of 32.4% in earnings ($2.50 versus $3.69).
  • The debt-to-equity ratio is very high at 3.00 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, SRLP maintains a poor quick ratio of 0.75, which illustrates the inability to avoid short-term cash problems.
  • The share price of SPRAGUE RESOURCES LP has not done very well: it is down 15.88% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
  • Net operating cash flow has declined marginally to $116.43 million or 4.88% when compared to the same quarter last year. Despite a decrease in cash flow SPRAGUE RESOURCES LP is still fairing well by exceeding its industry average cash flow growth rate of -49.17%.
  • The gross profit margin for SPRAGUE RESOURCES LP is currently extremely low, coming in at 9.19%. Regardless of SRLP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SRLP's net profit margin of 4.12% compares favorably to the industry average.

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Archrock Partners

Dividend Yield: 8.00%

Archrock Partners

(NASDAQ:

APLP

) shares currently have a dividend yield of 8.00%.

Archrock Partners, L.P., together with its subsidiaries, provides natural gas contract operations services to customers in the United States.

The average volume for Archrock Partners has been 297,000 shares per day over the past 30 days. Archrock Partners has a market cap of $857.3 million and is part of the energy industry. Shares are up 18% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Archrock Partners

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself, deteriorating net income and generally high debt management risk.

Highlights from the ratings report include:

  • 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, ARCHROCK PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is very high at 2.82 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, APLP has managed to keep a strong quick ratio of 2.19, which demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has decreased to $66.00 million or 15.45% when compared to the same quarter last year. Despite a decrease in cash flow ARCHROCK PARTNERS LP is still fairing well by exceeding its industry average cash flow growth rate of -36.08%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 46.95%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 96.42% 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.
  • The change in net income from the same quarter one year ago has exceeded that of the Energy Equipment & Services industry average, but is less than that of the S&P 500. The net income has significantly decreased by 97.4% when compared to the same quarter one year ago, falling from $20.09 million to $0.52 million.

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Resource Capital

Dividend Yield: 13.80%

Resource Capital

(NYSE:

RSO

) shares currently have a dividend yield of 13.80%.

Resource Capital Corp., a diversified real estate investment trust, primarily focuses on originating, holding, and managing commercial mortgage loans and other commercial real estate-related debt and equity investments in the United States.

The average volume for Resource Capital has been 218,900 shares per day over the past 30 days. Resource Capital has a market cap of $379.7 million and is part of the real estate industry. Shares are down 2.8% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Resource Capital

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity 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 compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income has decreased by 8.9% when compared to the same quarter one year ago, dropping from $15.49 million to $14.11 million.
  • 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, RESOURCE CAPITAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • RSO'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 29.70%, 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.
  • RSO, with its decline in revenue, underperformed when compared the industry average of 11.9%. Since the same quarter one year prior, revenues fell by 16.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • RESOURCE CAPITAL CORP has improved earnings per share by 10.7% 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, RESOURCE CAPITAL CORP swung to a loss, reporting -$0.44 versus $1.36 in the prior year. This year, the market expects an improvement in earnings ($1.60 versus -$0.44).

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