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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."

Spark Energy

Dividend Yield: 8.80%

Spark Energy

(NASDAQ:

SPKE

) shares currently have a dividend yield of 8.80%.

Spark Energy, Inc., through its subsidiaries, operates as an independent retail energy services company in the United States. It operates through two segments, Retail Natural Gas and Retail Electricity. The company has a P/E ratio of 21.19.

The average volume for Spark Energy has been 27,300 shares per day over the past 30 days. Spark Energy has a market cap of $51.2 million and is part of the utilities industry. Shares are up 20.4% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Spark Energy

TheStreet Recommends

as a

sell

. Among the areas we feel are negative, one of the most important has been poor profit margins.

Highlights from the ratings report include:

  • The gross profit margin for SPARK ENERGY INC is rather low; currently it is at 15.79%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, SPKE's net profit margin of 1.08% is significantly lower than the industry average.
  • SPKE, with its decline in revenue, slightly underperformed the industry average of 0.8%. Since the same quarter one year prior, revenues slightly dropped by 0.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.84, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.85 is somewhat weak and could be cause for future problems.
  • In its most recent trading session, SPKE has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors.
  • SPARK ENERGY INC 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 ($1.55 versus -$2.19).

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American Midstream Partners

Dividend Yield: 17.20%

American Midstream Partners

(NYSE:

AMID

) shares currently have a dividend yield of 17.20%.

American Midstream Partners, LP engages in gathering, treating, processing, and transporting natural gas, fractionating natural gas liquids (NGLs), and storing specialty chemical products in the Gulf Coast and Southeast regions of the United States.

The average volume for American Midstream Partners has been 272,600 shares per day over the past 30 days. American Midstream Partners has a market cap of $250.8 million and is part of the energy industry. Shares are down 45.9% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

American Midstream Partners

as a

sell

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

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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, AMERICAN MIDSTREAM PRTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • AMID's debt-to-equity ratio of 0.86 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 0.15 is very low and demonstrates very weak liquidity.
  • AMID'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 52.61%, 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.
  • The gross profit margin for AMERICAN MIDSTREAM PRTNRS LP is rather low; currently it is at 20.87%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -3.05% trails the industry average.
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 23.8% when compared to the same quarter one year ago, dropping from -$1.67 million to -$2.06 million.

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TransGlobe Energy

Dividend Yield: 7.50%

TransGlobe Energy

(NASDAQ:

TGA

) shares currently have a dividend yield of 7.50%.

TransGlobe Energy Corporation acquires, explores, develops, and produces oil and gas properties. The company operates through two segments, the Arab Republic of Egypt and the Republic of Yemen.

The average volume for TransGlobe Energy has been 160,100 shares per day over the past 30 days. TransGlobe Energy has a market cap of $193.6 million and is part of the energy industry. Shares are down 35.3% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

TransGlobe Energy

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:

  • TRANSGLOBE ENERGY CORP 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 two years. During the past fiscal year, TRANSGLOBE ENERGY CORP swung to a loss, reporting -$0.02 versus $0.57 in the prior year.
  • 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 148.0% when compared to the same quarter one year ago, falling from $26.20 million to -$12.58 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 Oil, Gas & Consumable Fuels industry and the overall market, TRANSGLOBE ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $24.32 million or 27.32% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, TRANSGLOBE ENERGY CORP 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 42.98%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 148.57% 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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