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."

Independence Realty

Dividend Yield: 8.90%

Independence Realty

(AMEX:

IRT

) shares currently have a dividend yield of 8.90%.

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 197,400 shares per day over the past 30 days. Independence Realty has a market cap of $257.3 million and is part of the real estate industry. Shares are down 13% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Independence Realty

as a

sell

. The area that we feel has been the company's primary weakness has been its generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • This stock's share value has moved by only 17.48% over the past year. 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.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, INDEPENDENCE REALTY TRUST's return on equity is below that of both the industry average and the S&P 500.
  • The gross profit margin for INDEPENDENCE REALTY TRUST is currently lower than what is desirable, coming in at 29.80%. 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 94.13% significantly outperformed against the industry.
  • INDEPENDENCE REALTY TRUST has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. 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 189.5% in earnings (-$0.17 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 42983.9% when compared to the same quarter one year prior, rising from -$0.06 million to $24.02 million.

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Legacy Reserves

Dividend Yield: 14.40%

Legacy Reserves

(NASDAQ:

LGCY

) shares currently have a dividend yield of 14.40%.

Legacy Reserves LP owns and operates oil and natural gas properties in the United States.

The average volume for Legacy Reserves has been 403,700 shares per day over the past 30 days. Legacy Reserves has a market cap of $290.3 million and is part of the energy industry. Shares are down 61.3% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

TheStreet Recommends

Legacy Reserves

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, poor profit margins and weak operating cash flow.

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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 133.4% when compared to the same quarter one year ago, falling from -$16.49 million to -$38.47 million.
  • The debt-to-equity ratio is very high at 3.27 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, LGCY maintains a poor quick ratio of 0.82, which illustrates the inability to avoid short-term cash problems.
  • 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, LEGACY RESERVES LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for LEGACY RESERVES LP is currently lower than what is desirable, coming in at 33.78%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -51.77% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to $2.38 million or 94.53% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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Cypress Energy Partners

Dividend Yield: 14.00%

Cypress Energy Partners

(NYSE:

CELP

) shares currently have a dividend yield of 14.00%.

Cypress Energy Partners, L.P. provides saltwater disposal (SWD), and other water and environmental services in North America. It operates in two segments: Water and Environmental Services (W&ES), and Pipeline Inspection and Integrity Services (PI&IS).

The average volume for Cypress Energy Partners has been 32,400 shares per day over the past 30 days. Cypress Energy Partners has a market cap of $68.8 million and is part of the energy industry. Shares are down 16.9% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Cypress Energy Partners

as a

sell

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

Highlights from the ratings report include:

  • The gross profit margin for CYPRESS ENERGY PARTNERS LP is currently extremely low, coming in at 11.83%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.12% trails that of the industry average.
  • Net operating cash flow has decreased to $7.15 million or 26.76% 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.
  • The debt-to-equity ratio is very high at 3.41 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 4.34, which shows the ability 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 52.79%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 41.93% 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 Commercial Services & Supplies industry average, but is less than that of the S&P 500. The net income has significantly decreased by 47.4% when compared to the same quarter one year ago, falling from $3.68 million to $1.94 million.

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