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: 12.50%

Plains GP Holdings

(NYSE:

PAGP

) shares currently have a dividend yield of 12.50%.

Plains GP Holdings, L.P., through its interest in Plains AAP, L.P., owns and operates midstream energy infrastructure and provides logistics services for crude oil, natural gas liquids, natural gas, and refined products in the United States and Canada. The company has a P/E ratio of 12.96.

The average volume for Plains GP Holdings has been 5,672,300 shares per day over the past 30 days. Plains GP Holdings has a market cap of $4.5 billion and is part of the energy industry. Shares are down 27.5% year-to-date as of the close of trading on Tuesday.

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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, 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 6.20 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • 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 73.45%, 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 32.6%. 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.
  • PLAINS GP HOLDINGS LP's earnings per share declined by 15.4% 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, PLAINS GP HOLDINGS LP increased its bottom line by earning $0.53 versus $0.47 in the prior year. This year, the market expects an improvement in earnings ($0.69 versus $0.53).

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New Residential Investment

Dividend Yield: 16.60%

New Residential Investment

(NYSE:

NRZ

) shares currently have a dividend yield of 16.60%.

New Residential Investment Corp., a real estate investment trust (REIT), focuses on investing in and managing residential mortgage related assets. It operates through Servicing Related Assets, Residential Securities and Loans, and Other Investments segments. The company has a P/E ratio of 9.10.

The average volume for New Residential Investment has been 3,682,500 shares per day over the past 30 days. New Residential Investment has a market cap of $2.6 billion and is part of the real estate industry. Shares are down 8.9% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

New Residential Investment

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, 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 56.9% when compared to the same quarter one year ago, falling from $126.37 million to $54.53 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. 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 -$155.16 million or 474.98% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The share price of NEW RESIDENTIAL INV CP has not done very well: it is down 17.21% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
  • NEW RESIDENTIAL INV CP 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, NEW RESIDENTIAL INV CP increased its bottom line by earning $2.52 versus $1.96 in the prior year. For the next year, the market is expecting a contraction of 26.2% in earnings ($1.86 versus $2.52).

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Hatteras Financial

Dividend Yield: 13.70%

Hatteras Financial

(NYSE:

HTS

) shares currently have a dividend yield of 13.70%.

Hatteras Financial Corp. operates as an externally-managed mortgage real estate investment trust (REIT) in the United States. The company has a P/E ratio of 42.48.

The average volume for Hatteras Financial has been 1,385,300 shares per day over the past 30 days. Hatteras Financial has a market cap of $1.3 billion and is part of the real estate industry. Shares are up 0.9% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Hatteras Financial

as a

sell

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

Highlights from the ratings report include:

  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, HATTERAS FINANCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • HTS'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 27.08%, 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. 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.
  • HATTERAS FINANCIAL CORP reported significant earnings per share improvement 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, HATTERAS FINANCIAL CORP reported lower earnings of $0.31 versus $0.36 in the prior year. This year, the market expects an improvement in earnings ($1.73 versus $0.31).
  • The gross profit margin for HATTERAS FINANCIAL CORP is currently very high, coming in at 84.50%. Regardless of HTS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HTS's net profit margin of 124.37% significantly outperformed against the industry.
  • 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 662.8% when compared to the same quarter one year prior, rising from -$25.85 million to $145.49 million.

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