Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer

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."

Hatteras Financial

Dividend Yield: 12.40%

Hatteras Financial

(NYSE:

HTS

) shares currently have a dividend yield of 12.40%.

Hatteras Financial Corp. operates as an externally-managed mortgage real estate investment trust (REIT) in the United States. The company has a P/E ratio of 76.81.

The average volume for Hatteras Financial has been 776,700 shares per day over the past 30 days. Hatteras Financial has a market cap of $1.6 billion and is part of the real estate industry. Shares are down 12% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Hatteras Financial

as a

sell

. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • HTS has underperformed the S&P 500 Index, declining 16.57% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, HATTERAS FINANCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • HTS, with its decline in revenue, underperformed when compared the industry average of 8.9%. Since the same quarter one year prior, revenues fell by 10.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for HATTERAS FINANCIAL CORP is currently very high, coming in at 88.32%. Regardless of HTS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HTS's net profit margin of 32.02% compares favorably to the industry average.
  • HATTERAS FINANCIAL CORP 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HATTERAS FINANCIAL CORP turned its bottom line around by earning $0.36 versus -$1.60 in the prior year. This year, the market expects an improvement in earnings ($1.20 versus $0.36).

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Harsco

Dividend Yield: 5.90%

Harsco

(NYSE:

HSC

) shares currently have a dividend yield of 5.90%.

Harsco Corporation provides industrial services and engineered products worldwide. The company operates through three segments: Harsco Metals and Minerals, Harsco Rail, and Harsco Industrial.

The average volume for Harsco has been 877,400 shares per day over the past 30 days. Harsco has a market cap of $1.1 billion and is part of the metals & mining industry. Shares are down 26.4% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Harsco

as a

sell

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

Highlights from the ratings report include:

  • The debt-to-equity ratio is very high at 3.05 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, HSC maintains a poor quick ratio of 0.75, which illustrates the inability to avoid short-term cash problems.
  • The gross profit margin for HARSCO CORP is currently lower than what is desirable, coming in at 28.63%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.38% trails that of the industry average.
  • Net operating cash flow has significantly decreased to $10.47 million or 61.95% 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.
  • HSC'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 45.62%, 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 company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Machinery industry and the overall market, HARSCO CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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Energy Company of Minas Gerais

Dividend Yield: 5.50%

Energy Company of Minas Gerais

(NYSE:

CIG

) shares currently have a dividend yield of 5.50%.

Companhia Energetica de Minas Gerais S.A. - CEMIG, through its subsidiaries, engages in the generation, transformation, transmission, distribution, and sale of electric energy primarily in Minas Gerais, Brazil.

The average volume for Energy Company of Minas Gerais has been 3,845,300 shares per day over the past 30 days. Energy Company of Minas Gerais has a market cap of $3.5 billion and is part of the utilities industry. Shares are down 44.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Energy Company of Minas Gerais

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, generally high debt management risk, generally disappointing historical performance in the stock itself and poor profit margins.

Highlights from the ratings report include:

  • CIA ENERGETICA DE MINAS's earnings per share declined by 43.8% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, CIA ENERGETICA DE MINAS reported lower earnings of $1.41 versus $1.84 in the prior year. For the next year, the market is expecting a contraction of 43.0% in earnings ($0.80 versus $1.41).
  • 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 Electric Utilities industry. The net income has significantly decreased by 44.7% when compared to the same quarter one year ago, falling from $643.20 million to $355.93 million.
  • The debt-to-equity ratio of 1.20 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.40, which clearly demonstrates the inability to cover short-term cash needs.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 67.01%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 43.76% 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 gross profit margin for CIA ENERGETICA DE MINAS is currently lower than what is desirable, coming in at 26.58%. Regardless of CIG's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CIG's net profit margin of 18.61% compares favorably to the industry average.

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