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."

Capstead Mortgage

Dividend Yield: 9.90%

Capstead Mortgage

(NYSE:

CMO

) shares currently have a dividend yield of 9.90%.

Capstead Mortgage Corporation operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 9.09.

The average volume for Capstead Mortgage has been 1,141,400 shares per day over the past 30 days. Capstead Mortgage has a market cap of $1.0 billion and is part of the real estate industry. Shares are down 13.6% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Capstead Mortgage

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 underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income has significantly decreased by 31.8% when compared to the same quarter one year ago, falling from $36.56 million to $24.94 million.
  • 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CAPSTEAD MORTGAGE CORP's return on equity is below that of both the industry average and the S&P 500.
  • The share price of CAPSTEAD MORTGAGE CORP has not done very well: it is down 20.00% 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. 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.
  • CAPSTEAD MORTGAGE CORP's earnings per share declined by 37.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CAPSTEAD MORTGAGE CORP increased its bottom line by earning $1.33 versus $0.93 in the prior year. For the next year, the market is expecting a contraction of 18.8% in earnings ($1.08 versus $1.33).
  • CMO, with its decline in revenue, underperformed when compared the industry average of 9.7%. Since the same quarter one year prior, revenues fell by 11.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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Abengoa Yield

Dividend Yield: 9.10%

Abengoa Yield

(NASDAQ:

ABY

) shares currently have a dividend yield of 9.10%.

Abengoa Yield plc owns a portfolio of renewable energy, conventional power, and electric transmission line contracted assets in North America, South America, and Europe.

The average volume for Abengoa Yield has been 1,116,600 shares per day over the past 30 days. Abengoa Yield has a market cap of $1.8 billion and is part of the utilities industry. Shares are down 32.1% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Abengoa Yield

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and generally high debt management risk.

Highlights from the ratings report include:

  • ABY'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 47.47%, 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.
  • The debt-to-equity ratio is very high at 2.46 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, ABY has managed to keep a strong quick ratio of 1.72, which demonstrates the ability to cover short-term cash needs.
  • Compared to other companies in the Independent Power Producers & Energy Traders industry and the overall market on the basis of return on equity, ABENGOA YIELD PLC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The gross profit margin for ABENGOA YIELD PLC is currently very high, coming in at 73.54%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 6.65% trails the industry average.
  • Net operating cash flow has significantly increased by 160.74% to $41.93 million when compared to the same quarter last year. In addition, ABENGOA YIELD PLC has also vastly surpassed the industry average cash flow growth rate of 12.22%.

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Plains GP Holdings

Dividend Yield: 4.90%

Plains GP Holdings

(NYSE:

PAGP

) shares currently have a dividend yield of 4.90%.

Plains GP Holdings, L.P., through its interest in Plains AAP, L.P., owns and operates midstream energy infrastructure and provides logistics services for crude oil, natural gas liquids, natural gas, and refined products in the United States and Canada. The company has a P/E ratio of 35.00.

The average volume for Plains GP Holdings has been 2,261,900 shares per day over the past 30 days. Plains GP Holdings has a market cap of $4.2 billion and is part of the energy industry. Shares are down 29.7% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Plains GP Holdings

as a

sell

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

Highlights from the ratings report include:

  • PAGP'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 40.57%, 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. 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, PAGP is still more expensive than most of the other companies in its industry.
  • The debt-to-equity ratio is very high at 5.89 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, PAGP has a quick ratio of 0.61, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has significantly decreased to -$75.00 million or 154.74% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for PLAINS GP HOLDINGS LP is currently extremely low, coming in at 5.97%. Regardless of PAGP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.45% trails the industry average.
  • 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PLAINS GP HOLDINGS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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