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."

Legacy Reserves

Dividend Yield: 16.90%

Legacy Reserves

(NASDAQ:

LGCY

) shares currently have a dividend yield of 16.90%.

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

The average volume for Legacy Reserves has been 465,900 shares per day over the past 30 days. Legacy Reserves has a market cap of $573.7 million and is part of the energy industry. Shares are down 25.5% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

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, 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 43608.4% when compared to the same quarter one year ago, falling from $0.53 million to -$228.85 million.
  • The debt-to-equity ratio is very high at 2.67 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 0.74, 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.
  • Net operating cash flow has significantly decreased to -$2.18 million or 103.61% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 71.05%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 34000.00% 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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Ecopetrol

Dividend Yield: 9.00%

Ecopetrol

(NYSE:

EC

) shares currently have a dividend yield of 9.00%.

Ecopetrol S.A., an integrated oil company, engages in the exploration, development, and production of crude oil and natural gas primarily in Colombia, Peru, Brazil, Angola, and the United States Gulf Coast. The company has a P/E ratio of 1566.00.

The average volume for Ecopetrol has been 809,400 shares per day over the past 30 days. Ecopetrol has a market cap of $23.8 billion and is part of the energy industry. Shares are down 31.5% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Ecopetrol

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 disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • ECOPETROL SA 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. 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, ECOPETROL SA reported lower earnings of $1.55 versus $3.31 in the prior year. For the next year, the market is expecting a contraction of 53.9% in earnings ($0.72 versus $1.55).
  • 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 96.2% when compared to the same quarter one year ago, falling from $1,672.95 million to $63.18 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ECOPETROL SA's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 66.37%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 96.29% 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.
  • Net operating cash flow has decreased to $1,379.89 million or 25.40% when compared to the same quarter last year. Despite a decrease in cash flow ECOPETROL SA is still fairing well by exceeding its industry average cash flow growth rate of -53.44%.

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Foresight Energy

Dividend Yield: 17.00%

Foresight Energy

(NYSE:

FELP

) shares currently have a dividend yield of 17.00%.

Foresight Energy LP engages in the development, mining, transportation, and sale of thermal coal primarily in the eastern United States and internationally. It operates four underground mining complexes, including Williamson, Sugar Camp, Hillsboro, and Macoupin in the Illinois Basin. The company has a P/E ratio of 10.00.

The average volume for Foresight Energy has been 168,300 shares per day over the past 30 days. Foresight Energy has a market cap of $566.0 million and is part of the metals & mining industry. Shares are down 47.6% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Foresight Energy

as a

sell

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

Highlights from the ratings report include:

  • The debt-to-equity ratio is very high at 8.45 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, FELP has a quick ratio of 0.54, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • The gross profit margin for FORESIGHT ENERGY LP is currently lower than what is desirable, coming in at 33.85%. It has decreased from the same quarter the previous year. Despite the weak results of the gross profit margin, the net profit margin of 17.69% has significantly outperformed against the industry average.
  • Net operating cash flow has decreased to $15.12 million or 46.80% when compared to the same quarter last year. Despite a decrease in cash flow of 46.80%, FORESIGHT ENERGY LP is in line with the industry average cash flow growth rate of -53.43%.
  • Despite the weak revenue results, FELP has significantly outperformed against the industry average of 38.8%. Since the same quarter one year prior, revenues slightly dropped by 1.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • FELP'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 54.22%, 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.

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