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."

Fly Leasing

Dividend Yield: 7.40%

Fly Leasing

(NYSE:

FLY

) shares currently have a dividend yield of 7.40%.

FLY Leasing Limited, together with its subsidiaries, engages in purchasing and leasing commercial aircraft under multi-year contracts to various airlines worldwide.

The average volume for Fly Leasing has been 249,900 shares per day over the past 30 days. Fly Leasing has a market cap of $560.8 million and is part of the diversified services industry. Shares are up 1.6% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Fly Leasing

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and disappointing return on equity.

Highlights from the ratings report include:

  • The debt-to-equity ratio is very high at 3.99 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Trading Companies & Distributors industry and the overall market, FLY LEASING LTD -ADR's return on equity significantly trails that of both the industry average and the S&P 500.
  • After a year of stock price fluctuations, the net result is that FLY'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.
  • FLY, with its decline in revenue, slightly underperformed the industry average of 2.3%. Since the same quarter one year prior, revenues slightly dropped by 6.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • FLY LEASING LTD -ADR has improved earnings per share by 27.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FLY LEASING LTD -ADR reported lower earnings of $1.32 versus $1.67 in the prior year. This year, the market expects an improvement in earnings ($1.94 versus $1.32).

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Gazit-Globe

Dividend Yield: 18.10%

Gazit-Globe

(NYSE:

GZT

) shares currently have a dividend yield of 18.10%.

Gazit-Globe Ltd., through its subsidiaries, acquires, owns, develops, operates, and redevelops supermarket-anchored shopping centers and retail properties in North America, Europe, Israel, and Brazil.

The average volume for Gazit-Globe has been 2,200 shares per day over the past 30 days. Gazit-Globe has a market cap of $1.3 billion and is part of the real estate industry. Shares are down 12.7% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Gazit-Globe

as a

sell

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

Highlights from the ratings report include:

  • The debt-to-equity ratio is very high at 5.54 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 0.48, which clearly demonstrates the inability to cover short-term cash needs.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Real Estate Management & Development industry and the overall market, GAZIT GLOBE's return on equity is below that of both the industry average and the S&P 500.
  • GAZIT GLOBE's earnings per share declined by 16.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, GAZIT GLOBE reported lower earnings of $0.10 versus $1.51 in the prior year.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, GZT has underperformed the S&P 500 Index, declining 14.28% 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 change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Real Estate Management & Development industry average. The net income has decreased by 12.1% when compared to the same quarter one year ago, dropping from $43.62 million to $38.34 million.

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KNOT Offshore Partners

Dividend Yield: 13.60%

KNOT Offshore Partners

(NYSE:

KNOP

) shares currently have a dividend yield of 13.60%.

KNOT Offshore Partners LP owns and operates shuttle tankers under long-term charters in the North Sea and Brazil. The company provides crude oil loading, transportation, and storage services under time charters and bareboat charters. The company has a P/E ratio of 14.47.

The average volume for KNOT Offshore Partners has been 97,900 shares per day over the past 30 days. KNOT Offshore Partners has a market cap of $211.8 million and is part of the transportation industry. Shares are down 32% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

KNOT Offshore Partners

as a

sell

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

Highlights from the ratings report include:

  • The debt-to-equity ratio of 1.18 is relatively high when compared with the industry average, suggesting a need for better debt level management.
  • KNOP'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 35.94%, 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 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, KNOT OFFSHORE PRTNRS LP's return on equity is below that of both the industry average and the S&P 500.
  • The gross profit margin for KNOT OFFSHORE PRTNRS LP is currently very high, coming in at 80.63%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.62% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 67.58% to $22.00 million when compared to the same quarter last year. In addition, KNOT OFFSHORE PRTNRS LP has also vastly surpassed the industry average cash flow growth rate of -26.28%.

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