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: 11.30%

Capstead Mortgage

(NYSE:

CMO

) shares currently have a dividend yield of 11.30%.

Capstead Mortgage Corporation operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 8.95.

The average volume for Capstead Mortgage has been 876,100 shares per day over the past 30 days. Capstead Mortgage has a market cap of $883.5 million and is part of the real estate industry. Shares are down 25.1% year-to-date as of the close of trading on Friday.

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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, 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 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 35.0% when compared to the same quarter one year ago, falling from $32.39 million to $21.07 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.
  • Net operating cash flow has declined marginally to $55.06 million or 3.12% 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.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 29.57%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 40.00% 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.
  • CAPSTEAD MORTGAGE CORP's earnings per share declined by 40.0% 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 28.6% in earnings ($0.95 versus $1.33).

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Medley Management

Dividend Yield: 13.60%

Medley Management

(NYSE:

MDLY

) shares currently have a dividend yield of 13.60%.

Medley Management Inc. is an investment holding company and operate and control all of the business and affairs of Medley LLC and its subsidiaries. Medley Management Inc. is based in New York, New York. The company has a P/E ratio of 10.35.

The average volume for Medley Management has been 28,200 shares per day over the past 30 days. Medley Management has a market cap of $35.5 million and is part of the financial services industry. Shares are down 63.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Medley Management

as a

sell

. Among the areas we feel are negative, one of the most important has been unimpressive growth in net income over time.

Highlights from the ratings report include:

  • The change in net income from the same quarter one year ago has exceeded that of the Capital Markets industry average, but is less than that of the S&P 500. The net income has significantly decreased by 28.0% when compared to the same quarter one year ago, falling from $0.38 million to $0.27 million.
  • MDLY, with its decline in revenue, underperformed when compared the industry average of 5.6%. Since the same quarter one year prior, revenues fell by 23.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • MEDLEY MANAGEMENT INC's earnings per share declined by 20.0% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($0.67 versus $0.24).
  • Looking at the price performance of MDLY's shares over the past 12 months, there is not much good news to report: the stock is down 63.29%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter.
  • The gross profit margin for MEDLEY MANAGEMENT INC is currently very high, coming in at 73.49%. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, MDLY's net profit margin of 1.72% significantly trails the industry average.

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City Office REIT

Dividend Yield: 8.20%

City Office REIT

(NYSE:

CIO

) shares currently have a dividend yield of 8.20%.

City Office REIT, Inc is an equity real estate investment trust. The fund invests in the real estate markets of the United States. It acquires, own and operate high-quality office properties. City Office REIT, Inc was formed in November 26, 2013 and is domiciled in the United States.

The average volume for City Office REIT has been 44,900 shares per day over the past 30 days. City Office REIT has a market cap of $143.0 million and is part of the real estate industry. Shares are down 10.5% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

City Office REIT

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, poor profit margins 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 41.4% when compared to the same quarter one year ago, falling from -$1.77 million to -$2.50 million.
  • The gross profit margin for CITY OFFICE REIT INC is rather low; currently it is at 19.73%. Regardless of CIO's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CIO's net profit margin of -17.09% significantly underperformed when compared to the industry average.
  • CIO has underperformed the S&P 500 Index, declining 10.30% 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.
  • Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CITY OFFICE REIT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 122.34% to $6.89 million when compared to the same quarter last year. In addition, CITY OFFICE REIT INC has also vastly surpassed the industry average cash flow growth rate of 9.41%.

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