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."

ARMOUR Residential REIT

Dividend Yield: 18.90%

ARMOUR Residential REIT

(NYSE:

ARR

) shares currently have a dividend yield of 18.90%.

ARMOUR Residential REIT, Inc. invests in and manages a portfolio of residential mortgage backed securities in the United States. The company is managed by ARMOUR Capital Management LP.

The average volume for ARMOUR Residential REIT has been 578,200 shares per day over the past 30 days. ARMOUR Residential REIT has a market cap of $835.0 million and is part of the real estate industry. Shares are down 28.1% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

ARMOUR Residential REIT

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, 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 509.6% when compared to the same quarter one year ago, falling from $54.09 million to -$221.55 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 33.34%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 562.50% 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.
  • ARMOUR RESIDENTIAL REIT 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, ARMOUR RESIDENTIAL REIT INC reported poor results of -$4.40 versus -$4.24 in the prior year. This year, the market expects an improvement in earnings ($3.75 versus -$4.40).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ARMOUR RESIDENTIAL REIT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ARMOUR RESIDENTIAL REIT INC is currently very high, coming in at 89.08%. Regardless of ARR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ARR's net profit margin of -258.48% significantly underperformed when compared to the industry average.

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Hatteras Financial

Dividend Yield: 12.90%

Hatteras Financial

(NYSE:

HTS

) shares currently have a dividend yield of 12.90%.

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 795,600 shares per day over the past 30 days. Hatteras Financial has a market cap of $1.4 billion and is part of the real estate industry. Shares are down 23.4% 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 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 when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 207.7% when compared to the same quarter one year ago, falling from $77.89 million to -$83.89 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, HATTERAS FINANCIAL CORP'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 26.84%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 224.00% 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.
  • HTS, with its decline in revenue, slightly underperformed the industry average of 6.1%. Since the same quarter one year prior, revenues slightly dropped by 3.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for HATTERAS FINANCIAL CORP is currently very high, coming in at 86.25%. Regardless of HTS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HTS's net profit margin of -106.94% significantly underperformed when compared to the industry average.

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Enerplus

Dividend Yield: 5.20%

Enerplus

(NYSE:

ERF

) shares currently have a dividend yield of 5.20%.

Enerplus Corporation, together with subsidiaries, engages in the exploration and development of crude oil and natural gas in the United States and Canada.

The average volume for Enerplus has been 1,907,600 shares per day over the past 30 days. Enerplus has a market cap of $1.1 billion and is part of the energy industry. Shares are down 47.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Enerplus

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 high debt management risk 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 534.0% when compared to the same quarter one year ago, falling from $67.43 million to -$292.67 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 Oil, Gas & Consumable Fuels industry and the overall market, ENERPLUS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $122.65 million or 38.38% 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.
  • ERF's debt-to-equity ratio of 0.82 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.45 is very low and demonstrates very weak liquidity.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 66.15%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 543.75% 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.

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