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."

Plains GP Holdings

Dividend Yield: 9.70%

Plains GP Holdings

(NYSE:

PAGP

) shares currently have a dividend yield of 9.70%.

Plains GP Holdings, L.P. together with its subsidiaries, owns and operates midstream energy infrastructure in the United States and Canada. It operates through three segments: Transportation, Facilities, and Supply and Logistics. The company has a P/E ratio of 18.06.

The average volume for Plains GP Holdings has been 3,826,200 shares per day over the past 30 days. Plains GP Holdings has a market cap of $5.9 billion and is part of the energy industry. Shares are up 4.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Plains GP Holdings

as a

sell

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

Highlights from the ratings report include:

  • The debt-to-equity ratio is very high at 6.77 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, PAGP has a quick ratio of 0.53, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has significantly decreased to $120.00 million or 83.37% 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.
  • Looking at the price performance of PAGP's shares over the past 12 months, there is not much good news to report: the stock is down 66.58%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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 PLAINS GP HOLDINGS LP is currently extremely low, coming in at 10.37%. Regardless of PAGP'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 0.50% trails the industry average.
  • PAGP, with its decline in revenue, underperformed when compared the industry average of 34.2%. Since the same quarter one year prior, revenues fell by 47.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

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New Residential Investment

Dividend Yield: 15.30%

New Residential Investment

(NYSE:

NRZ

) shares currently have a dividend yield of 15.30%.

New Residential Investment Corp., a real estate investment trust, focuses on investing in and managing residential mortgage related assets in the United States. It operates through Servicing Related Assets, Residential Securities and Loans, and Other Investments segments. The company has a P/E ratio of 9.08.

The average volume for New Residential Investment has been 2,636,800 shares per day over the past 30 days. New Residential Investment has a market cap of $2.8 billion and is part of the real estate industry. Shares are down 1.3% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

TheStreet Recommends

New Residential Investment

as a

sell

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

Highlights from the ratings report include:

  • 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, NEW RESIDENTIAL INV CP's return on equity is below that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$41.35 million or 147.76% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • NRZ'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 29.48%, 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.
  • NEW RESIDENTIAL INV CP has improved earnings per share by 18.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, NEW RESIDENTIAL INV CP reported lower earnings of $1.31 versus $2.52 in the prior year. This year, the market expects an improvement in earnings ($2.00 versus $1.31).
  • 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 89.9% when compared to the same quarter one year prior, rising from $54.23 million to $102.98 million.

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EnLink Midstream

Dividend Yield: 7.40%

EnLink Midstream

(NYSE:

ENLC

) shares currently have a dividend yield of 7.40%.

EnLink Midstream, LLC engages in gathering, transmission, processing, and marketing of natural gas and natural gas liquids (NGLs), condensate, and crude oil in the United States.

The average volume for EnLink Midstream has been 806,100 shares per day over the past 30 days. EnLink Midstream has a market cap of $2.5 billion and is part of the energy industry. Shares are down 4.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

EnLink Midstream

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 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 763.3% when compared to the same quarter one year ago, falling from $29.40 million to -$195.00 million.
  • The debt-to-equity ratio of 1.35 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 0.38, which clearly demonstrates the inability to cover short-term cash needs.
  • 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 on the basis of return on equity, ENLINK MIDSTREAM LLC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The gross profit margin for ENLINK MIDSTREAM LLC is rather low; currently it is at 15.95%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -18.28% is significantly below that of 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 60.09%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 755.55% 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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