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."

Bank of Nova Scotia

Dividend Yield: 4.30%

Bank of Nova Scotia

(NYSE:

BNS

) shares currently have a dividend yield of 4.30%.

The Bank of Nova Scotia provides various personal, commercial, corporate, and investment banking services in Canada and internationally. The company has a P/E ratio of 11.24.

The average volume for Bank of Nova Scotia has been 891,900 shares per day over the past 30 days. Bank of Nova Scotia has a market cap of $60.8 billion and is part of the banking industry. Shares are down 11.4% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Bank of Nova Scotia

as a

sell

. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • BNS has underperformed the S&P 500 Index, declining 14.29% from its price level of one year ago. 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.
  • BANK OF NOVA SCOTIA's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past year. During the past fiscal year, BANK OF NOVA SCOTIA increased its bottom line by earning $5.66 versus $1.29 in the prior year.
  • The net income growth from the same quarter one year ago has exceeded that of the Commercial Banks industry average, but is less than that of the S&P 500. The net income increased by 1.5% when compared to the same quarter one year prior, going from $1,655.00 million to $1,679.00 million.
  • Net operating cash flow has significantly increased by 286.39% to $5,850.00 million when compared to the same quarter last year. Despite an increase in cash flow, BANK OF NOVA SCOTIA's average is still marginally south of the industry average growth rate of 294.60%.
  • The gross profit margin for BANK OF NOVA SCOTIA is currently very high, coming in at 72.49%. Regardless of BNS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BNS's net profit margin of 21.67% significantly outperformed against the industry.

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American Capital Agency

Dividend Yield: 12.30%

American Capital Agency

(NASDAQ:

AGNC

) shares currently have a dividend yield of 12.30%.

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

The average volume for American Capital Agency has been 3,426,100 shares per day over the past 30 days. American Capital Agency has a market cap of $7.6 billion and is part of the real estate industry. Shares are down 0.8% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

American Capital Agency

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 222.0% when compared to the same quarter one year ago, falling from -$100.00 million to -$322.00 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 AGENCY 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 $328.00 million or 67.74% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • In its most recent trading session, AGNC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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 AGENCY 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, AMERICAN CAPITAL AGENCY CORP swung to a loss, reporting -$0.73 versus $3.17 in the prior year. This year, the market expects an improvement in earnings ($2.65 versus -$0.73).

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Vanguard Natural Resources

Dividend Yield: 9.90%

Vanguard Natural Resources

(NASDAQ:

VNR

) shares currently have a dividend yield of 9.90%.

Vanguard Natural Resources, LLC, through its subsidiaries, acquires and develops oil and natural gas properties in the United States. The company has a P/E ratio of 25.82.

The average volume for Vanguard Natural Resources has been 1,011,100 shares per day over the past 30 days. Vanguard Natural Resources has a market cap of $1.2 billion and is part of the energy industry. Shares are down 3% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Vanguard Natural Resources

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, feeble growth in its earnings per share, unimpressive growth in net income, generally high debt management risk and disappointing return on equity.

Highlights from the ratings report include:

  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 53.36%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 8100.00% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, VNR is still more expensive than most of the other companies in its industry.
  • VANGUARD NATURAL RESOURCES 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. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, VANGUARD NATURAL RESOURCES reported lower earnings of $0.54 versus $0.75 in the prior year. For the next year, the market is expecting a contraction of 85.2% in earnings ($0.08 versus $0.54).
  • 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 2947.4% when compared to the same quarter one year ago, falling from $2.11 million to -$60.14 million.
  • The debt-to-equity ratio of 1.26 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, VNR maintains a poor quick ratio of 0.78, which illustrates the inability to avoid short-term cash problems.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, VANGUARD NATURAL RESOURCES's return on equity significantly trails that of both the industry average and the S&P 500.

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