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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."

Great Ajax

Dividend Yield: 7.20%

Great Ajax

(NYSE:

AJX

) shares currently have a dividend yield of 7.20%.

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 39,400 shares per day over the past 30 days. Great Ajax has a market cap of $220.0 million and is part of the real estate industry. Shares are up 14.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Great Ajax

TheStreet Recommends

as a

sell

. Among the areas we feel are negative, one of the most important has been weak operating cash flow.

Highlights from the ratings report include:

  • Net operating cash flow has significantly decreased to -$4.13 million or 634.67% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • After a year of stock price fluctuations, the net result is that AJX'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. 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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Five Oaks Investment

Dividend Yield: 13.90%

Five Oaks Investment

(NYSE:

OAKS

) shares currently have a dividend yield of 13.90%.

Five Oaks Investment Corp. focuses on investing, financing, and managing a portfolio of residential mortgage loans and mortgage-backed securities (MBS).

The average volume for Five Oaks Investment has been 67,800 shares per day over the past 30 days. Five Oaks Investment has a market cap of $75.6 million and is part of the real estate industry. Shares are down 2.8% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Five Oaks 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 230.4% when compared to the same quarter one year ago, falling from -$5.13 million to -$16.95 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, FIVE OAKS INVESTMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to $0.65 million or 70.95% 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 48.51%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 197.56% 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.
  • FIVE OAKS INVESTMENT 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 two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FIVE OAKS INVESTMENT CORP reported poor results of -$0.21 versus -$0.03 in the prior year. This year, the market expects an improvement in earnings ($0.82 versus -$0.21).

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Hoegh LNG Partners

Dividend Yield: 9.30%

Hoegh LNG Partners

(NYSE:

HMLP

) shares currently have a dividend yield of 9.30%.

Hoegh LNG Partners LP focuses on owning, operating, and acquiring floating storage and regasification units (FSRUs), liquefied natural gas (LNG) carriers, and other LNG infrastructure assets under long-term charters. As of March 31, 2016, it had a fleet of four FSRUs. The company has a P/E ratio of 12.51.

The average volume for Hoegh LNG Partners has been 35,400 shares per day over the past 30 days. Hoegh LNG Partners has a market cap of $467.3 million and is part of the transportation industry. Shares are down 3.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Hoegh LNG Partners

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk, 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 140.3% when compared to the same quarter one year ago, falling from $2.58 million to -$1.04 million.
  • Currently the debt-to-equity ratio of 1.73 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, HMLP has a quick ratio of 0.67, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has decreased to $11.94 million or 15.73% when compared to the same quarter last year. Despite a decrease in cash flow HOEGH LNG PARTNERS LP is still fairing well by exceeding its industry average cash flow growth rate of -48.72%.
  • The share price of HOEGH LNG PARTNERS LP has not done very well: it is down 22.79% 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. 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.
  • HOEGH LNG PARTNERS LP 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. 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, HOEGH LNG PARTNERS LP increased its bottom line by earning $1.56 versus $0.12 in the prior year. This year, the market expects an improvement in earnings ($1.72 versus $1.56).

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