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."

New Residential Investment

Dividend Yield: 10.20%

New Residential Investment (NYSE: NRZ) shares currently have a dividend yield of 10.20%.

New Residential Investment Corp., a real estate investment trust, focuses on investing in residential mortgage related assets. It operates through Servicing Related Assets, Residential Securities and Loans, and Other Investments segments. The company has a P/E ratio of 5.37.

The average volume for New Residential Investment has been 1,105,800 shares per day over the past 30 days. New Residential Investment has a market cap of $2.1 billion and is part of the real estate industry. Shares are up 18.3% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates New Residential Investment 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 $41.38 million or 52.17% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, NEW RESIDENTIAL INV CP has marginally lower results.
  • NEW RESIDENTIAL INV CP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. For the next year, the market is expecting a contraction of 19.9% in earnings ($1.57 versus $1.96).
  • 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 100.1% when compared to the same quarter one year prior, rising from $63.15 million to $126.37 million.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, and has traded in line with the S&P 500. 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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Linn Energy

Dividend Yield: 10.50%

Linn Energy (NASDAQ: LINE) shares currently have a dividend yield of 10.50%.

Linn Energy, LLC, an independent oil and natural gas company, acquires and develops oil and natural gas properties in the Unites States.

The average volume for Linn Energy has been 5,350,400 shares per day over the past 30 days. Linn Energy has a market cap of $4.0 billion and is part of the energy industry. Shares are up 18.1% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Linn Energy as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The debt-to-equity ratio is very high at 2.27 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.48, which clearly demonstrates the inability to cover short-term cash needs.
  • The gross profit margin for LINN ENERGY LLC is currently extremely low, coming in at 5.01%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, LINE's net profit margin of -6.96% significantly underperformed when compared to the industry average.
  • LINE'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 63.65%, 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.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, LINN ENERGY LLC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $276.08 million or 22.32% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -12.58%.

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American Realty Capital Properties

Dividend Yield: 10.80%

American Realty Capital Properties (NASDAQ: ARCP) shares currently have a dividend yield of 10.80%.

American Realty Capital Properties, Inc. owns and acquires single tenant, freestanding commercial real estate that is net leased on a medium-term basis, primarily to investment grade credit rated and other creditworthy tenants. The company principally invests in retail and office properties.

The average volume for American Realty Capital Properties has been 13,714,500 shares per day over the past 30 days. American Realty Capital Properties has a market cap of $8.4 billion and is part of the real estate industry. Shares are up 8.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates American Realty Capital Properties as a sell. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The gross profit margin for AMERICAN RLTY CAP PPTY INC is currently extremely low, coming in at 6.89%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, ARCP's net profit margin of -10.55% significantly underperformed when compared to the industry average.
  • ARCP'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 35.73%, 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.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN RLTY CAP PPTY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • AMERICAN RLTY CAP PPTY INC reported significant earnings per share improvement 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, AMERICAN RLTY CAP PPTY INC reported poor results of -$2.34 versus -$0.47 in the prior year. This year, the market expects an improvement in earnings (-$0.72 versus -$2.34).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 44.0% when compared to the same quarter one year prior, rising from -$71.96 million to -$40.33 million.

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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