Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer

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."

Azure Midstream Partners

Dividend Yield: 13.90%

Azure Midstream Partners

(NYSE:

AZUR

) shares currently have a dividend yield of 13.90%.

Azure Midstream Partners, LP acquires, owns, develops, and operates midstream energy assets in the United States. It operates through two segments, Gathering and Processing, and Logistics. The company has a P/E ratio of 8.66.

The average volume for Azure Midstream Partners has been 145,400 shares per day over the past 30 days. Azure Midstream Partners has a market cap of $97.9 million and is part of the energy industry. Shares are down 46.8% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Azure Midstream Partners

as a

sell

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

Highlights from the ratings report include:

  • Net operating cash flow has significantly decreased to -$2.60 million or 129.37% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for AZURE MIDSTREAM PARTNERS LP is currently lower than what is desirable, coming in at 28.94%. Regardless of AZUR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, AZUR's net profit margin of -9.89% significantly underperformed when compared to the industry average.
  • AZUR'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 46.82%, 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. 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 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 Oil, Gas & Consumable Fuels industry and the overall market, AZURE MIDSTREAM PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • AZURE MIDSTREAM PARTNERS LP 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, AZURE MIDSTREAM PARTNERS LP increased its bottom line by earning $0.87 versus $0.36 in the prior year. For the next year, the market is expecting a contraction of 65.5% in earnings ($0.30 versus $0.87).

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Rait Financial

Dividend Yield: 13.30%

Rait Financial

(NYSE:

RAS

) shares currently have a dividend yield of 13.30%.

RAIT Financial Trust operates as a self-managed and self-advised real estate investment trust (REIT). The company, through its subsidiaries, invests in, manages, and services real estate-related assets with a focus on commercial real estate.

The average volume for Rait Financial has been 669,800 shares per day over the past 30 days. Rait Financial has a market cap of $449.3 million and is part of the real estate industry. Shares are down 30.2% year-to-date as of the close of trading on Wednesday.

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TheStreet Recommends

TheStreet Ratings rates

Rait Financial

as a

sell

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

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 Real Estate Investment Trusts (REITs) industry and the overall market, RAIT FINANCIAL TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for RAIT FINANCIAL TRUST is rather low; currently it is at 24.43%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 31.32% trails that of the industry average.
  • RAS'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 26.05%, 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.
  • RAIT FINANCIAL 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, RAIT FINANCIAL TRUST continued to lose money by earning -$3.88 versus -$4.58 in the prior year. This year, the market expects an improvement in earnings (-$0.26 versus -$3.88).
  • 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 249.0% when compared to the same quarter one year prior, rising from -$18.24 million to $27.18 million.

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Deswell Industries

Dividend Yield: 7.90%

Deswell Industries

(NASDAQ:

DSWL

) shares currently have a dividend yield of 7.90%.

Deswell Industries, Inc. manufactures and sells injection-molded plastic parts and components, electronic products, assembling, and metallic parts for original equipment manufacturers and contract manufacturers.

The average volume for Deswell Industries has been 25,500 shares per day over the past 30 days. Deswell Industries has a market cap of $28.6 million and is part of the consumer non-durables industry. Shares are unchanged year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Deswell Industries

as a

sell

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

Highlights from the ratings report include:

  • Net operating cash flow has significantly decreased to -$0.31 million or 447.72% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • DSWL has underperformed the S&P 500 Index, declining 13.88% 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.
  • The gross profit margin for DESWELL INDUSTRIES INC is currently lower than what is desirable, coming in at 29.46%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.16% trails the industry average.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, DESWELL INDUSTRIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • DESWELL INDUSTRIES INC 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. During the past fiscal year, DESWELL INDUSTRIES INC continued to lose money by earning -$0.14 versus -$0.47 in the prior year.

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