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."

American Capital Agency

Dividend Yield: 11.30%

American Capital Agency (NASDAQ: AGNC) shares currently have a dividend yield of 11.30%.

American Capital Agency Corp. operates as a real estate investment trust (REIT).

The average volume for American Capital Agency has been 4,060,400 shares per day over the past 30 days. American Capital Agency has a market cap of $8.1 billion and is part of the real estate industry. Shares are up 17.1% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates American Capital Agency 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 and weak operating cash flow.

Highlights from the ratings report include:
  • AMERICAN CAPITAL AGENCY 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. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, AMERICAN CAPITAL AGENCY CORP reported lower earnings of $3.17 versus $4.40 in the prior year. For the next year, the market is expecting a contraction of 66.2% in earnings ($1.07 versus $3.17).
  • 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 98.2% when compared to the same quarter one year ago, falling from $1,829.00 million to $33.00 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 AGENCY 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 $444.00 million or 10.12% 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.
  • In its most recent trading session, AGNC 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.

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Penn West Petroleum

Dividend Yield: 10.60%

Penn West Petroleum (NYSE: PWE) shares currently have a dividend yield of 10.60%.

Penn West Petroleum Ltd., an exploration and production company, acquires, explores, develops, exploits, and holds interests in petroleum and natural gas properties and related assets in western Canada.

The average volume for Penn West Petroleum has been 2,938,300 shares per day over the past 30 days. Penn West Petroleum has a market cap of $2.4 billion and is part of the energy industry. Shares are down 43.3% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Penn West Petroleum as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PENN WEST PETROLEUM LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • PWE'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 49.87%, 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.
  • PENN WEST PETROLEUM LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, PENN WEST PETROLEUM LTD swung to a loss, reporting -$1.78 versus $0.37 in the prior year.
  • PWE, with its decline in revenue, underperformed when compared the industry average of 2.8%. Since the same quarter one year prior, revenues fell by 14.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • PWE's debt-to-equity ratio is very low at 0.30 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.36 is very weak and demonstrates a lack of ability to pay short-term obligations.

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Invesco Mortgage Capital

Dividend Yield: 12.40%

Invesco Mortgage Capital (NYSE: IVR) shares currently have a dividend yield of 12.40%.

Invesco Mortgage Capital Inc., a real estate investment trust, focuses on investing in, financing, and managing residential and commercial mortgage-backed securities and mortgage loans. The company invests in residential mortgage-backed securities for which a U.S.

The average volume for Invesco Mortgage Capital has been 1,065,200 shares per day over the past 30 days. Invesco Mortgage Capital has a market cap of $2.0 billion and is part of the real estate industry. Shares are up 10.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Invesco 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 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 164.5% when compared to the same quarter one year ago, falling from $141.56 million to -$91.34 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, INVESCO MORTGAGE CAPITAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $97.55 million or 29.25% 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.
  • INVESCO MORTGAGE CAPITAL INC 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. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, INVESCO MORTGAGE CAPITAL INC reported lower earnings of $0.90 versus $2.89 in the prior year. This year, the market expects an improvement in earnings ($1.99 versus $0.90).
  • In its most recent trading session, IVR 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.

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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