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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: 7.20%

Spark Energy

(NASDAQ:

SPKE

) shares currently have a dividend yield of 7.20%.

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 28.10.

The average volume for Spark Energy has been 37,500 shares per day over the past 30 days. Spark Energy has a market cap of $62.7 million and is part of the utilities industry. Shares are down 3.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Spark Energy

TheStreet Recommends

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and poor profit margins.

Highlights from the ratings report include:

  • The debt-to-equity ratio is very high at 4.52 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, SPKE maintains a poor quick ratio of 0.74, which illustrates the inability to avoid short-term cash problems.
  • The gross profit margin for SPARK ENERGY INC is rather low; currently it is at 16.22%. Regardless of SPKE's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SPKE's net profit margin of 1.43% is significantly lower than the industry average.
  • Compared to its closing price of one year ago, SPKE's share price has jumped by 40.38%, exceeding the performance of the broader market during that same time frame. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
  • SPARK ENERGY INC's earnings per share declined by 11.4% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.64 versus -$2.19).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Electric Utilities industry average. The net income increased by 23.8% when compared to the same quarter one year prior, going from $1.06 million to $1.31 million.

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Five Oaks Investment

Dividend Yield: 12.90%

Five Oaks Investment

(NYSE:

OAKS

) shares currently have a dividend yield of 12.90%.

Five Oaks Investment Corp. focuses on investing, financing, and managing a portfolio of mortgage-backed securities (MBS). It invests in agency and non-agency residential MBS, multi-family MBS, residential mortgage loans, mortgage servicing rights, and other mortgage-related investments.

The average volume for Five Oaks Investment has been 109,400 shares per day over the past 30 days. Five Oaks Investment has a market cap of $82.3 million and is part of the real estate industry. Shares are up 4.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Five Oaks 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 125.9% when compared to the same quarter one year ago, falling from $5.03 million to -$1.31 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, FIVE OAKS INVESTMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$0.08 million or 101.58% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 49.46%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 153.57% 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.
  • FIVE OAKS INVESTMENT 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FIVE OAKS INVESTMENT CORP swung to a loss, reporting -$0.03 versus $0.42 in the prior year. This year, the market expects an improvement in earnings ($1.11 versus -$0.03).

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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 the 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 497,300 shares per day over the past 30 days. EnLink Midstream has a market cap of $2.3 billion and is part of the energy industry. Shares are down 6.4% 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 feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • ENLINK MIDSTREAM LLC 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. For the next year, the market is expecting a contraction of 208.2% in earnings (-$0.79 versus $0.73).
  • 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 829.8% when compared to the same quarter one year ago, falling from $26.50 million to -$193.40 million.
  • The debt-to-equity ratio of 1.13 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 0.43, which clearly demonstrates the inability to cover short-term cash needs.
  • The gross profit margin for ENLINK MIDSTREAM LLC is currently extremely low, coming in at 14.46%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -16.52% 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 58.35%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 837.50% 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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