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."

Great Ajax

Dividend Yield: 7.30%

Great Ajax

(NYSE:

AJX

) shares currently have a dividend yield of 7.30%.

Great Ajax Corp. focuses primarily on acquiring, investing in, and managing a portfolio of re-performing and non-performing mortgage loans secured by single-family residences and single-family properties. The company has a P/E ratio of 7.26.

The average volume for Great Ajax has been 50,900 shares per day over the past 30 days. Great Ajax has a market cap of $219.2 million and is part of the real estate industry. Shares are up 13% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Great Ajax

as a

sell

. The area that we feel has been the company's primary weakness has been its feeble growth in its earnings per share.

Highlights from the ratings report include:

  • Looking at where the stock is today compared to one year ago, we find that it is higher, and it has outperformed the rise in the S&P 500 over the same period. 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.
  • GREAT AJAX CORP 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, GREAT AJAX CORP increased its bottom line by earning $1.62 versus $0.22 in the prior year. This year, the market expects an improvement in earnings ($2.20 versus $1.62).
  • 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 110.2% when compared to the same quarter one year prior, rising from $3.64 million to $7.65 million.
  • Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, GREAT AJAX CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

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Fifth Street Senior Floating Rate

Dividend Yield: 11.30%

Fifth Street Senior Floating Rate

(NASDAQ:

FSFR

) shares currently have a dividend yield of 11.30%.

Fifth Street Senior Floating Rate Corp. The company has a P/E ratio of 7.66.

The average volume for Fifth Street Senior Floating Rate has been 70,300 shares per day over the past 30 days. Fifth Street Senior Floating Rate has a market cap of $233.7 million and is part of the financial services industry. Shares are down 8.6% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Fifth Street Senior Floating Rate

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, 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 Capital Markets industry. The net income has significantly decreased by 305.2% when compared to the same quarter one year ago, falling from $6.48 million to -$13.31 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 Capital Markets industry and the overall market, FIFTH STREET SR FLTG RATE CP's return on equity significantly trails that of both the industry average and 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 26.40%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 304.54% 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.
  • FIFTH STREET SR FLTG RATE 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, FIFTH STREET SR FLTG RATE CP reported lower earnings of $0.54 versus $0.97 in the prior year. This year, the market expects an improvement in earnings ($0.90 versus $0.54).
  • The gross profit margin for FIFTH STREET SR FLTG RATE CP is rather high; currently it is at 66.66%. Regardless of FSFR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FSFR's net profit margin of -95.63% significantly underperformed when compared to the industry average.

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Independence Realty

Dividend Yield: 9.40%

Independence Realty

(AMEX:

IRT

) shares currently have a dividend yield of 9.40%.

Independence Realty Trust, Inc is an equity real estate investment trust launched by RAIT Financial Trust. It is managed by Independence Realty Advisors, LLC. The fund invests in the real estate markets of the United States. It makes investments in apartment properties to create its portfolio. The company has a P/E ratio of 9.71.

The average volume for Independence Realty has been 344,400 shares per day over the past 30 days. Independence Realty has a market cap of $364.0 million and is part of the real estate industry. Shares are up 2.3% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Independence Realty

as a

sell

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

Highlights from the ratings report include:

  • The gross profit margin for INDEPENDENCE REALTY TRUST is rather low; currently it is at 21.53%. Regardless of IRT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, IRT's net profit margin of -0.19% significantly underperformed when compared to the industry average.
  • IRT has underperformed the S&P 500 Index, declining 13.56% 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.
  • INDEPENDENCE REALTY 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 year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, INDEPENDENCE REALTY TRUST increased its bottom line by earning $0.80 versus $0.19 in the prior year. For the next year, the market is expecting a contraction of 53.8% in earnings ($0.37 versus $0.80).
  • 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 67.8% when compared to the same quarter one year prior, rising from -$0.23 million to -$0.08 million.
  • IRT's very impressive revenue growth greatly exceeded the industry average of 11.9%. Since the same quarter one year prior, revenues leaped by 78.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

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