Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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."

ZAIS Financial

Dividend Yield: 8.90%

ZAIS Financial

(NYSE:

ZFC

) shares currently have a dividend yield of 8.90%.

Zais Financial Corp. invests in, finances, and manages performing and re-performing residential mortgage loans. The company also invests in, finances, and manages residential mortgage-backed securities (RMBS) that are not issued or guaranteed by a federally chartered corporation. The company has a P/E ratio of 3.98.

The average volume for ZAIS Financial has been 66,400 shares per day over the past 30 days. ZAIS Financial has a market cap of $143.1 million and is part of the real estate industry. Shares are up 12.3% year-to-date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates

ZAIS Financial

as a

sell

. Among the areas we feel are negative, one of the most important has been weak operating cash flow.

Highlights from the ratings report include:

  • Net operating cash flow has significantly decreased to -$3.44 million or 201.02% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • In its most recent trading session, ZFC 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. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • ZAIS FINANCIAL CORP 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ZAIS FINANCIAL CORP increased its bottom line by earning $0.81 versus $0.23 in the prior year. This year, the market expects an improvement in earnings ($1.31 versus $0.81).
  • 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 441.8% when compared to the same quarter one year prior, rising from -$6.78 million to $23.17 million.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Five Oaks Investment

Dividend Yield: 13.40%

Five Oaks Investment

(NYSE:

OAKS

) shares currently have a dividend yield of 13.40%.

Five Oaks Investment Corp. focuses on investing, financing, and managing agency and non-agency residential mortgage-backed securities (RMBS), residential mortgage loans, multi-family MBS, and other mortgage-related investments. It would elect to be taxed as a real estate investment trust.

The average volume for Five Oaks Investment has been 120,300 shares per day over the past 30 days. Five Oaks Investment has a market cap of $164.2 million and is part of the real estate industry. Shares are up 6.6% year-to-date as of the close of trading on Tuesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates

TheStreet Recommends

Five Oaks Investment

as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 44.5% when compared to the same quarter one year ago, falling from $7.97 million to $4.42 million.
  • Net operating cash flow has decreased to $4.20 million or 43.07% 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 share price of FIVE OAKS INVESTMENT CORP has not done very well: it is down 8.71% 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.
  • 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. This year, the market expects an improvement in earnings ($1.33 versus $0.43).
  • The revenue fell significantly faster than the industry average of 12.2%. Since the same quarter one year prior, revenues fell by 38.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Southcross Energy Partners

Dividend Yield: 7.90%

Southcross Energy Partners

(NYSE:

SXE

) shares currently have a dividend yield of 7.90%.

Southcross Energy Partners, L.P., together with its subsidiaries, provides natural gas gathering, processing, treating, compression, and transportation services in the United States. It also offers natural gas liquid (NGL) fractionation and transportation services.

The average volume for Southcross Energy Partners has been 61,400 shares per day over the past 30 days. Southcross Energy Partners has a market cap of $475.6 million and is part of the utilities industry. Shares are up 11.7% year-to-date as of the close of trading on Tuesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates

Southcross Energy Partners

as a

sell

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

Highlights from the ratings report include:

  • In its most recent trading session, SXE 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. 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.
  • The gross profit margin for SOUTHCROSS ENERGY PRTNRS LP is currently extremely low, coming in at 4.00%. Regardless of SXE'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 -1.51% trails the industry average.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SOUTHCROSS ENERGY PRTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The current debt-to-equity ratio, 0.52, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.83 is somewhat weak and could be cause for future problems.
  • Net operating cash flow has significantly increased by 592.72% to $9.53 million when compared to the same quarter last year. In addition, SOUTHCROSS ENERGY PRTNRS LP has also vastly surpassed the industry average cash flow growth rate of -6.28%.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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