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."

PennyMac Mortgage Investment

Dividend Yield: 13.90%

PennyMac Mortgage Investment

(NYSE:

PMT

) shares currently have a dividend yield of 13.90%.

PennyMac Mortgage Investment Trust, a specialty finance company, invests primarily in residential mortgage loans and mortgage-related assets in the United States. The company operates in two segments, Correspondent Production and Investment Activities. The company has a P/E ratio of 11.65.

The average volume for PennyMac Mortgage Investment has been 963,600 shares per day over the past 30 days. PennyMac Mortgage Investment has a market cap of $976.1 million and is part of the real estate industry. Shares are down 12% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

PennyMac Mortgage Investment

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, 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 40.7% when compared to the same quarter one year ago, falling from $26.51 million to $15.71 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, PENNYMAC MORTGAGE INVEST TR's return on equity is below that of both the industry average and 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 36.18%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 38.23% 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.
  • PENNYMAC MORTGAGE INVEST TR's earnings per share declined by 38.2% in the most recent quarter compared to 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, PENNYMAC MORTGAGE INVEST TR reported lower earnings of $1.15 versus $2.46 in the prior year. This year, the market expects an improvement in earnings ($1.70 versus $1.15).
  • 46.80% is the gross profit margin for PENNYMAC MORTGAGE INVEST TR which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 19.14% trails the industry average.

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Williams Companies

Dividend Yield: 15.50%

Williams Companies

(NYSE:

WMB

) shares currently have a dividend yield of 15.50%.

The Williams Companies, Inc. operates as an energy infrastructure company primarily in the United States. The company operates through Williams Partners, Williams NGL (natural gas liquids) & Petchem Services, and Other segments. The company has a P/E ratio of 21.71.

The average volume for Williams Companies has been 17,711,600 shares per day over the past 30 days. Williams Companies has a market cap of $12.4 billion and is part of the energy industry. Shares are down 37.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Williams Companies

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 470.5% when compared to the same quarter one year ago, falling from $193.00 million to -$715.00 million.
  • The debt-to-equity ratio is very high at 3.98 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.46, 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, WILLIAMS COS INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Net operating cash flow has decreased to $592.00 million or 41.44% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, WILLIAMS COS INC has marginally lower results.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 66.69%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 465.38% 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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American Capital Mortgage Investment

Dividend Yield: 11.40%

American Capital Mortgage Investment

(NASDAQ:

MTGE

) shares currently have a dividend yield of 11.40%.

American Capital Mortgage Investment Corp. operates as a real estate investment trust (REIT) in the United States.

The average volume for American Capital Mortgage Investment has been 651,500 shares per day over the past 30 days. American Capital Mortgage Investment has a market cap of $669.6 million and is part of the real estate industry. Shares are down 0.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

American Capital Mortgage Investment

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, 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 130.6% when compared to the same quarter one year ago, falling from $17.83 million to -$5.45 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 Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN CAPITAL MTG INV CP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The share price of AMERICAN CAPITAL MTG INV CP has not done very well: it is down 22.73% 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.
  • AMERICAN CAPITAL MTG 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. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, AMERICAN CAPITAL MTG INV CP swung to a loss, reporting -$0.84 versus $3.06 in the prior year. This year, the market expects an improvement in earnings ($1.91 versus -$0.84).
  • MTGE, with its very weak revenue results, has greatly underperformed against the industry average of 7.9%. Since the same quarter one year prior, revenues plummeted by 97.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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