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."

Transocean

Dividend Yield: 15.70%

Transocean (NYSE: RIG) shares currently have a dividend yield of 15.70%.

Transocean Ltd., together with its subsidiaries, provides offshore contract drilling services for oil and gas wells worldwide. The company primarily offers deepwater and harsh environment drilling, and oil and gas drilling management services.

The average volume for Transocean has been 15,426,100 shares per day over the past 30 days. Transocean has a market cap of $6.9 billion and is part of the energy industry. Shares are up 0.3% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Transocean as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity 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 Energy Equipment & Services industry. The net income has significantly decreased by 506.0% when compared to the same quarter one year ago, falling from $546.00 million to -$2,217.00 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 Energy Equipment & Services industry and the overall market, TRANSOCEAN LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 56.89%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 513.51% 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.
  • RIG, with its decline in revenue, underperformed when compared the industry average of 10.8%. Since the same quarter one year prior, revenues slightly dropped by 7.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • RIG's debt-to-equity ratio of 0.71 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. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.42 is sturdy.

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Penn West Petroleum

Dividend Yield: 18.70%

Penn West Petroleum (NYSE: PWE) shares currently have a dividend yield of 18.70%.

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 6,286,800 shares per day over the past 30 days. Penn West Petroleum has a market cap of $1.3 billion and is part of the energy industry. Shares are up 13.5% 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 feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • PENN WEST PETROLEUM LTD 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 suffered a declining pattern earnings per share over the past two years. During the past fiscal year, PENN WEST PETROLEUM LTD swung to a loss, reporting -$1.77 versus $0.37 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 144.1% when compared to the same quarter one year ago, falling from $34.00 million to -$15.00 million.
  • 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.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 71.06%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 142.85% 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.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 21.4%. Since the same quarter one year prior, revenues fell by 14.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

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Seadrill Partners

Dividend Yield: 14.90%

Seadrill Partners (NYSE: SDLP) shares currently have a dividend yield of 14.90%.

Seadrill Partners LLC owns, operates, and acquires offshore drilling units. The company operates semi-submersible drilling rigs, tender rings, and drill ships. It primarily serves various oil and gas companies. The company was founded in 2012 and is headquartered in London, the United Kingdom. The company has a P/E ratio of 7.07.

The average volume for Seadrill Partners has been 638,600 shares per day over the past 30 days. Seadrill Partners has a market cap of $1.1 billion and is part of the energy industry. Shares are down 7.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Seadrill 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, disappointing return on equity and generally high debt management risk.

Highlights from the ratings report include:
  • Looking at the price performance of SDLP's shares over the past 12 months, there is not much good news to report: the stock is down 51.91%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
  • 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. In comparison to the other companies in the Energy Equipment & Services industry and the overall market, SEADRILL PARTNERS LLC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Currently the debt-to-equity ratio of 1.76 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, SDLP's quick ratio is somewhat strong at 1.43, demonstrating the ability to handle short-term liquidity needs.
  • SEADRILL PARTNERS LLC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, SEADRILL PARTNERS LLC increased its bottom line by earning $1.70 versus $1.52 in the prior year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 112.6% when compared to the same quarter one year prior, rising from $25.40 million to $54.00 million.

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