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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."

Williams Companies

Dividend Yield: 11.30%

Williams Companies

(NYSE:

WMB

) shares currently have a dividend yield of 11.30%.

The Williams Companies, Inc. operates as an energy infrastructure company primarily in the United States. The company operates through Williams Partners, Williams NGL (natural gas liquids) & Petchem Services, and Other segments. The company has a P/E ratio of 38.97.

The average volume for Williams Companies has been 11,714,100 shares per day over the past 30 days. Williams Companies has a market cap of $17.0 billion and is part of the energy industry. Shares are down 11.2% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Williams Companies

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 192.8% when compared to the same quarter one year ago, falling from $70.00 million to -$65.00 million.
  • The debt-to-equity ratio is very high at 4.36 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 0.32, which clearly demonstrates the inability to cover short-term cash needs.
  • 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, WILLIAMS COS INC's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 55.90%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 200.00% 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.
  • WILLIAMS COS 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, WILLIAMS COS INC swung to a loss, reporting -$0.76 versus $2.82 in the prior year. This year, the market expects an improvement in earnings ($0.71 versus -$0.76).

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American Capital Mortgage Investment

Dividend Yield: 10.10%

American Capital Mortgage Investment

(NASDAQ:

MTGE

) shares currently have a dividend yield of 10.10%.

American Capital Mortgage Investment Corp. operates as a real estate investment trust (REIT) in the United States.

The average volume for American Capital Mortgage Investment has been 522,300 shares per day over the past 30 days. American Capital Mortgage Investment has a market cap of $724.8 million and is part of the real estate industry. Shares are up 13.8% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

American Capital Mortgage Investment

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 168.6% when compared to the same quarter one year ago, falling from $31.06 million to -$21.30 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, AMERICAN CAPITAL MTG INV CP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $23.90 million or 18.87% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The share price of AMERICAN CAPITAL MTG INV CP has not done very well: it is down 9.08% 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.
  • AMERICAN CAPITAL MTG INV CP 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. 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, AMERICAN CAPITAL MTG INV CP swung to a loss, reporting -$0.84 versus $3.06 in the prior year. This year, the market expects an improvement in earnings ($1.77 versus -$0.84).

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Hatteras Financial

Dividend Yield: 11.10%

Hatteras Financial

(NYSE:

HTS

) shares currently have a dividend yield of 11.10%.

Hatteras Financial Corp. operates as an externally-managed mortgage real estate investment trust (REIT) in the United States.

The average volume for Hatteras Financial has been 1,576,100 shares per day over the past 30 days. Hatteras Financial has a market cap of $1.5 billion and is part of the real estate industry. Shares are up 24% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Hatteras Financial

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, 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 106.1% when compared to the same quarter one year ago, falling from -$34.54 million to -$71.17 million.
  • Net operating cash flow has decreased to $84.59 million or 15.56% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The share price of HATTERAS FINANCIAL CORP has not done very well: it is down 9.22% 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.
  • HATTERAS FINANCIAL CORP 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. 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, HATTERAS FINANCIAL CORP reported lower earnings of $0.31 versus $0.36 in the prior year. This year, the market expects an improvement in earnings ($1.69 versus $0.31).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, HATTERAS FINANCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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