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: 7.60%

Fly Leasing

(NYSE:

FLY

) shares currently have a dividend yield of 7.60%.

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 256,300 shares per day over the past 30 days. Fly Leasing has a market cap of $545.7 million and is part of the diversified services industry. Shares are down 3.5% 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 deteriorating net income, generally high debt management risk, 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 significantly underperformed when compared to that of the S&P 500 and the Trading Companies & Distributors industry. The net income has significantly decreased by 368.8% when compared to the same quarter one year ago, falling from $21.67 million to -$58.26 million.
  • The debt-to-equity ratio is very high at 4.24 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.
  • The share price of FLY LEASING LTD -ADR has not done very well: it is down 11.50% 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.
  • FLY LEASING LTD -ADR 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, 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 ($1.76 versus $1.32).

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Spark Energy

Dividend Yield: 9.40%

Spark Energy

(NASDAQ:

SPKE

) shares currently have a dividend yield of 9.40%.

Spark Energy, Inc., through its subsidiaries, operates as an independent retail energy services company in the United States. It operates through two segments, Retail Natural Gas and Retail Electricity. The company has a P/E ratio of 19.87.

The average volume for Spark Energy has been 34,200 shares per day over the past 30 days. Spark Energy has a market cap of $48.0 million and is part of the utilities industry. Shares are up 11.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Spark Energy

as a

sell

. Among the areas we feel are negative, one of the most important has been poor profit margins.

Highlights from the ratings report include:

  • The gross profit margin for SPARK ENERGY INC is rather low; currently it is at 15.79%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.08% trails the industry average.
  • SPKE, with its decline in revenue, slightly underperformed the industry average of 2.1%. Since the same quarter one year prior, revenues slightly dropped by 0.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.84, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.85 is somewhat weak and could be cause for future problems.
  • SPKE has underperformed the S&P 500 Index, declining 11.59% from its price level of one year ago.
  • SPARK ENERGY INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.68 versus -$2.19).

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Independence Realty

Dividend Yield: 9.70%

Independence Realty

(AMEX:

IRT

) shares currently have a dividend yield of 9.70%.

Independence Realty Trust, Inc is an equity real estate investment trust launched by RAIT Financial Trust. It is managed by Independence Realty Advisors, LLC. The fund invests in the real estate markets of the United States. It makes investments in apartment properties to create its portfolio.

The average volume for Independence Realty has been 245,500 shares per day over the past 30 days. Independence Realty has a market cap of $236.8 million and is part of the real estate industry. Shares are down 22.8% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Independence Realty

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:

  • IRT'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 27.37%, 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. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, INDEPENDENCE REALTY TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for INDEPENDENCE REALTY TRUST is rather low; currently it is at 20.30%. Regardless of IRT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, IRT's net profit margin of 1.47% is significantly lower than the industry average.
  • INDEPENDENCE REALTY TRUST 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 year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, INDEPENDENCE REALTY TRUST increased its bottom line by earning $0.19 versus $0.06 in the prior year. For the next year, the market is expecting a contraction of 173.7% in earnings (-$0.14 versus $0.19).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 363.3% when compared to the same quarter one year prior, rising from -$0.13 million to $0.34 million.

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