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."

Western Asset Mortgage Capital

Dividend Yield: 18.10%

Western Asset Mortgage Capital

(NYSE:

WMC

) shares currently have a dividend yield of 18.10%.

Western Asset Mortgage Capital Corporation operates as a real estate investment trust in the United States.

The average volume for Western Asset Mortgage Capital has been 446,500 shares per day over the past 30 days. Western Asset Mortgage Capital has a market cap of $415.8 million and is part of the real estate industry. Shares are down 2.7% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Western Asset Mortgage Capital

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 356.6% when compared to the same quarter one year ago, falling from $14.15 million to -$36.30 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, WESTERN ASSET MTG CAPITAL CP'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 $3.99 million or 84.67% 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 36.00%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 358.82% 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.
  • WESTERN ASSET MTG CAPITAL 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, WESTERN ASSET MTG CAPITAL CP swung to a loss, reporting -$0.25 versus $2.36 in the prior year. This year, the market expects an improvement in earnings ($1.32 versus -$0.25).

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Stonemor Partners

Dividend Yield: 10.40%

Stonemor Partners

(NYSE:

STON

) shares currently have a dividend yield of 10.40%.

StoneMor Partners L.P., together with its subsidiaries, owns and operates cemeteries in the United States. It operates through two segments, Cemetery Operations and Funeral Homes.

The average volume for Stonemor Partners has been 217,100 shares per day over the past 30 days. Stonemor Partners has a market cap of $893.1 million and is part of the diversified services industry. Shares are down 7.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Stonemor Partners

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:

  • 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 Diversified Consumer Services industry and the overall market, STONEMOR PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $5.23 million or 10.57% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, STONEMOR PARTNERS LP has marginally lower results.
  • STON has underperformed the S&P 500 Index, declining 14.88% from its price level of one year ago. 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.
  • STONEMOR PARTNERS LP has improved earnings per share by 23.3% 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, STONEMOR PARTNERS LP reported poor results of -$0.79 versus -$0.35 in the prior year. This year, the market expects an improvement in earnings (-$0.36 versus -$0.79).
  • Despite the current debt-to-equity ratio of 1.84, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Consumer Services industry. Despite the fact that STON's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.00 is high and demonstrates strong liquidity.

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Independence Realty

Dividend Yield: 9.50%

Independence Realty

(AMEX:

IRT

) shares currently have a dividend yield of 9.50%.

Independence Realty Trust, Inc is an equity real estate investment trust launched by RAIT Financial Trust. It is managed by Independence Realty Advisors, LLC. The fund invests in the real estate markets of the United States. It makes investments in apartment properties to create its portfolio. The company has a P/E ratio of 9.87.

The average volume for Independence Realty has been 297,100 shares per day over the past 30 days. Independence Realty has a market cap of $359.7 million and is part of the real estate industry. Shares are unchanged year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Independence Realty

as a

sell

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

Highlights from the ratings report include:

  • Net operating cash flow has decreased to $7.46 million or 12.30% 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.
  • The gross profit margin for INDEPENDENCE REALTY TRUST is rather low; currently it is at 21.53%. Regardless of IRT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, IRT's net profit margin of -0.19% significantly underperformed when compared to the industry average.
  • IRT has underperformed the S&P 500 Index, declining 7.23% from its price level of one year ago. 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.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, INDEPENDENCE REALTY TRUST's return on equity is below that of both the industry average and the S&P 500.
  • INDEPENDENCE REALTY TRUST reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, INDEPENDENCE REALTY TRUST increased its bottom line by earning $0.80 versus $0.19 in the prior year. For the next year, the market is expecting a contraction of 53.8% in earnings ($0.37 versus $0.80).

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