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."

Kennametal

Dividend Yield: 4.50%

Kennametal

(NYSE:

KMT

) shares currently have a dividend yield of 4.50%.

Kennametal Inc. manufactures and supplies tooling, engineered components, and advanced materials consumed in production processes worldwide. It operates through two segments, Industrial and Infrastructure.

The average volume for Kennametal has been 1,230,600 shares per day over the past 30 days. Kennametal has a market cap of $1.4 billion and is part of the industrial industry. Shares are down 49.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Kennametal

as a

sell

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

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 Machinery industry. The net income has significantly decreased by 115.8% when compared to the same quarter one year ago, falling from $39.49 million to -$6.23 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 Machinery industry and the overall market, KENNAMETAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for KENNAMETAL INC is currently lower than what is desirable, coming in at 32.08%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.12% trails that of the industry average.
  • Net operating cash flow has declined marginally to $38.71 million or 9.03% when compared to the same quarter last year. Despite a decrease in cash flow of 9.03%, KENNAMETAL INC is in line with the industry average cash flow growth rate of -18.10%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 47.53%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 116.32% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

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ARMOUR Residential REIT

Dividend Yield: 18.80%

ARMOUR Residential REIT

(NYSE:

ARR

) shares currently have a dividend yield of 18.80%.

ARMOUR Residential REIT, Inc. invests in and manages a portfolio of residential mortgage backed securities in the United States. The company is managed by ARMOUR Capital Management LP.

The average volume for ARMOUR Residential REIT has been 590,600 shares per day over the past 30 days. ARMOUR Residential REIT has a market cap of $840.2 million and is part of the real estate industry. Shares are down 27.3% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

ARMOUR Residential REIT

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 509.6% when compared to the same quarter one year ago, falling from $54.09 million to -$221.55 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.98%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 562.50% 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.
  • ARMOUR RESIDENTIAL REIT INC 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, ARMOUR RESIDENTIAL REIT INC reported poor results of -$4.40 versus -$4.24 in the prior year. This year, the market expects an improvement in earnings ($3.75 versus -$4.40).
  • 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, ARMOUR RESIDENTIAL REIT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ARMOUR RESIDENTIAL REIT INC is currently very high, coming in at 89.08%. Regardless of ARR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ARR's net profit margin of -258.48% significantly underperformed when compared to the industry average.

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WP Glimcher

Dividend Yield: 9.50%

WP Glimcher

(NYSE:

WPG

) shares currently have a dividend yield of 9.50%.

Washington Prime Group Inc. (NYSE:WPG.WI) operates independently of Simon Property Group Inc. as of May 28, 2014. The company has a P/E ratio of 52.85.

The average volume for WP Glimcher has been 1,186,700 shares per day over the past 30 days. WP Glimcher has a market cap of $2.0 billion and is part of the real estate industry. Shares are down 39.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

WP Glimcher

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, feeble growth in its earnings per share, deteriorating net income and poor profit margins.

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 36.60%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 90.47% compared to the year-earlier 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.
  • WP GLIMCHER INC 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, 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 76.5% when compared to the same quarter one year ago, falling from $32.20 million to $7.57 million.
  • The gross profit margin for WP GLIMCHER INC is currently lower than what is desirable, coming in at 25.75%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 3.48% significantly trails the industry average.
  • Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, WP GLIMCHER INC's return on equity significantly trails that of both the industry average and the S&P 500.

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