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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."

Hugoton Royalty

Dividend Yield: 9.40%

Hugoton Royalty

(NYSE:

HGT

) shares currently have a dividend yield of 9.40%.

Hugoton Royalty Trust operates as an express trust in the United States. The company holds an 80% net profits interests in certain natural gas producing working interest properties of XTO Energy Inc. XTO Energy Inc. The company has a P/E ratio of 2.46.

The average volume for Hugoton Royalty has been 90,700 shares per day over the past 30 days. Hugoton Royalty has a market cap of $105.2 million and is part of the energy industry. Shares are down 68.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Hugoton Royalty

TheStreet Recommends

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 deteriorating net income.

Highlights from the ratings report include:

  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 74.58%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 93.33% 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.
  • The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 93.3% when compared to the same quarter one year ago, falling from $17.85 million to $1.19 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, HUGOTON ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • HGT, with its very weak revenue results, has greatly underperformed against the industry average of 36.8%. Since the same quarter one year prior, revenues plummeted by 91.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • HUGOTON ROYALTY TRUST 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. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, HUGOTON ROYALTY TRUST increased its bottom line by earning $1.09 versus $0.87 in the prior year.

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Tronox

Dividend Yield: 18.40%

Tronox

(NYSE:

TROX

) shares currently have a dividend yield of 18.40%.

Tronox Limited produces and markets titanium bearing mineral sands and titanium dioxide (TiO2) pigment in North America, Europe, South Africa, and the Asia-Pacific region. It primarily operates in two segments, Mineral Sands and Pigment.

The average volume for Tronox has been 1,389,900 shares per day over the past 30 days. Tronox has a market cap of $350.3 million and is part of the chemicals industry. Shares are down 77.3% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Tronox

as a

sell

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

Highlights from the ratings report include:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Chemicals industry and the overall market, TRONOX LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for TRONOX LTD is currently extremely low, coming in at 6.78%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -10.43% is significantly below that of the industry average.
  • Net operating cash flow has decreased to $32.00 million or 40.74% 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 debt-to-equity ratio is very high at 2.66 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, TROX's quick ratio is somewhat strong at 1.16, demonstrating the ability to handle short-term liquidity needs.
  • TROX'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 76.24%, 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.

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Pengrowth Energy

Dividend Yield: 10.60%

Pengrowth Energy

(NYSE:

PGH

) shares currently have a dividend yield of 10.60%.

Pengrowth Energy Corporation engages in the acquisition, development, exploration, and production of oil and natural gas assets in the Alberta, British Columbia, Saskatchewan, and Nova Scotia provinces in Canada.

The average volume for Pengrowth Energy has been 1,618,100 shares per day over the past 30 days. Pengrowth Energy has a market cap of $461.6 million and is part of the energy industry. Shares are down 72.7% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Pengrowth Energy

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally high debt management risk.

Highlights from the ratings report include:

  • PENGROWTH ENERGY CORP 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. During the past fiscal year, PENGROWTH ENERGY CORP reported poor results of -$1.09 versus -$0.61 in the prior year.
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 731.4% when compared to the same quarter one year ago, falling from $52.20 million to -$329.60 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PENGROWTH ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $131.70 million or 20.75% when compared to the same quarter last year. Despite a decrease in cash flow of 20.75%, PENGROWTH ENERGY CORP is in line with the industry average cash flow growth rate of -25.83%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 77.07%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 710.00% 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.

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