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: 11.90%

Capstead Mortgage

(NYSE:

CMO

) shares currently have a dividend yield of 11.90%.

Capstead Mortgage Corporation operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 8.51.

The average volume for Capstead Mortgage has been 826,900 shares per day over the past 30 days. Capstead Mortgage has a market cap of $840.4 million and is part of the real estate industry. Shares are down 27% 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, 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 28.96%, 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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Western Refining Logistics

Dividend Yield: 7.90%

Western Refining Logistics

(NYSE:

WNRL

) shares currently have a dividend yield of 7.90%.

Western Refining Logistics, LP engages in the ownership, acquisition, development, and operation of terminals, storage tanks, pipelines, and other logistics assets in the Southwestern United States. The company has a P/E ratio of 13.63.

The average volume for Western Refining Logistics has been 114,200 shares per day over the past 30 days. Western Refining Logistics has a market cap of $473.0 million and is part of the energy industry. Shares are down 33.3% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Western Refining Logistics

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 poor profit margins.

Highlights from the ratings report include:

  • WNRL'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 28.93%, 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 gross profit margin for WESTERN REFINING LGS LP is currently extremely low, coming in at 4.92%. Regardless of WNRL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, WNRL's net profit margin of 2.44% compares favorably to the industry average.
  • Despite the weak revenue results, WNRL has outperformed against the industry average of 36.8%. Since the same quarter one year prior, revenues fell by 26.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Net operating cash flow has slightly increased to $17.69 million or 7.23% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -26.50%.
  • WESTERN REFINING LGS LP has improved earnings per share by 29.6% 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, WESTERN REFINING LGS LP turned its bottom line around by earning $1.16 versus -$0.91 in the prior year. This year, the market expects an improvement in earnings ($1.42 versus $1.16).

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Sprague Resources

Dividend Yield: 9.30%

Sprague Resources

(NYSE:

SRLP

) shares currently have a dividend yield of 9.30%.

Sprague Resources LP engages in the purchase, storage, distribution, and sale of refined petroleum products and natural gas in the United States. The company operates through four segments: Refined Products, Natural Gas, Materials Handling, and Other Operations. The company has a P/E ratio of 3.99.

The average volume for Sprague Resources has been 27,000 shares per day over the past 30 days. Sprague Resources has a market cap of $238.4 million and is part of the energy industry. Shares are down 10.7% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Sprague Resources

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and poor profit margins.

Highlights from the ratings report include:

  • The debt-to-equity ratio is very high at 4.05 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.36, which clearly demonstrates the inability to cover short-term cash needs.
  • The gross profit margin for SPRAGUE RESOURCES LP is currently extremely low, coming in at 7.46%. Regardless of SRLP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SRLP's net profit margin of 1.53% compares favorably to the industry average.
  • After a year of stock price fluctuations, the net result is that SRLP's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. 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.
  • SPRAGUE RESOURCES 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, SPRAGUE RESOURCES LP turned its bottom line around by earning $6.07 versus -$1.25 in the prior year. For the next year, the market is expecting a contraction of 44.4% in earnings ($3.38 versus $6.07).
  • SRLP, with its decline in revenue, slightly underperformed the industry average of 36.8%. Since the same quarter one year prior, revenues fell by 37.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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