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."

Midcoast Energy Partners

Dividend Yield: 16.10%

Midcoast Energy Partners

(NYSE:

MEP

) shares currently have a dividend yield of 16.10%.

Midcoast Energy Partners, L.P. engages in gathering, processing, treating, transporting, and marketing natural gas and natural gas liquids (NGL) in the United States. It operates through two segments, Gathering, Processing, and Transportation; and Logistics and Marketing.

The average volume for Midcoast Energy Partners has been 145,900 shares per day over the past 30 days. Midcoast Energy Partners has a market cap of $200.6 million and is part of the energy industry. Shares are down 0.3% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Midcoast Energy Partners

as a

sell

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

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 157.1% when compared to the same quarter one year ago, falling from $6.30 million to -$3.60 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MIDCOAST ENERGY PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite currently having a low debt-to-equity ratio of 0.50, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.20 is very low and demonstrates very weak liquidity.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 26.69%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 157.14% 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.
  • The gross profit margin for MIDCOAST ENERGY PARTNERS LP is currently extremely low, coming in at 6.52%. Regardless of MEP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.54% trails the industry average.

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Deswell Industries

Dividend Yield: 12.40%

Deswell Industries

(NASDAQ:

DSWL

) shares currently have a dividend yield of 12.40%.

Deswell Industries, Inc. manufactures and sells injection-molded plastic parts and components; and assembles electronic products for original equipment manufacturers and contract manufacturers.

The average volume for Deswell Industries has been 65,700 shares per day over the past 30 days. Deswell Industries has a market cap of $18.1 million and is part of the consumer non-durables industry. Shares are down 23.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Deswell Industries

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, poor profit margins 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 against the S&P 500 and did not exceed that of the Electronic Equipment, Instruments & Components industry. The net income has significantly decreased by 39.5% when compared to the same quarter one year ago, falling from -$1.70 million to -$2.38 million.
  • The gross profit margin for DESWELL INDUSTRIES INC is rather low; currently it is at 15.67%. Regardless of DSWL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, DSWL's net profit margin of -19.19% significantly underperformed when compared to the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 39.46%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 50.00% 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.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, DESWELL INDUSTRIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • DESWELL INDUSTRIES INC's earnings per share declined by 50.0% in the most recent quarter compared to 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, DESWELL INDUSTRIES INC continued to lose money by earning -$0.14 versus -$0.47 in the prior year.

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Hoegh LNG Partners

Dividend Yield: 11.70%

Hoegh LNG Partners

(NYSE:

HMLP

) shares currently have a dividend yield of 11.70%.

Hoegh LNG Partners LP focuses on owning, operating, and acquiring floating storage and regasification units, liquefied natural gas (LNG) carriers, and other LNG infrastructure assets under long-term charters. Hoegh LNG GP LLC is the general partner of the company. The company has a P/E ratio of 15.17.

The average volume for Hoegh LNG Partners has been 54,900 shares per day over the past 30 days. Hoegh LNG Partners has a market cap of $371.3 million and is part of the transportation industry. Shares are down 25.4% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Hoegh LNG Partners

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:

  • HMLP'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 33.61%, 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.
  • Despite the weak revenue results, HMLP has outperformed against the industry average of 36.8%. Since the same quarter one year prior, revenues fell by 25.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • HMLP's debt-to-equity ratio of 0.84 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 4.03 is very high and demonstrates very strong liquidity.
  • HOEGH LNG PARTNERS LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.34 versus $0.04).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 56.8% when compared to the same quarter one year prior, rising from $3.31 million to $5.19 million.

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