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

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: 9.70%

ZAIS Financial (NYSE: ZFC) shares currently have a dividend yield of 9.70%.

Zais Financial Corp. originates, acquires, finances, sells, services, and manages residential mortgage loans in the United States. It originates mortgage loans through its GMFS mortgage banking platform; and acquires performing, re-performing, and newly originated loans through other channels. The company has a P/E ratio of 5.28.

The average volume for ZAIS Financial has been 21,400 shares per day over the past 30 days. ZAIS Financial has a market cap of $131.2 million and is part of the real estate industry. Shares are down 5.8% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates ZAIS Financial as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, 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 83.2% when compared to the same quarter one year ago, falling from $2.22 million to $0.37 million.
  • Net operating cash flow has significantly decreased to -$30.09 million or 1904.73% 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. 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.
  • ZAIS FINANCIAL 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 company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ZAIS FINANCIAL CORP increased its bottom line by earning $2.91 versus $0.81 in the prior year. For the next year, the market is expecting a contraction of 31.3% in earnings ($2.00 versus $2.91).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.9%. Since the same quarter one year prior, revenues slightly increased by 2.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.

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KNOT Offshore Partners

Dividend Yield: 12.60%

KNOT Offshore Partners (NYSE: KNOP) shares currently have a dividend yield of 12.60%.

KNOT Offshore Partners LP owns and operates shuttle tankers under long-term charters in the North Sea and Brazil. The company provides crude oil loading, transportation, and storage services under time charters and bareboat charters. The company has a P/E ratio of 15.28.

The average volume for KNOT Offshore Partners has been 154,400 shares per day over the past 30 days. KNOT Offshore Partners has a market cap of $223.7 million and is part of the transportation industry. Shares are down 28.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates KNOT Offshore Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The debt-to-equity ratio of 1.46 is relatively high when compared with the industry average, suggesting a need for better debt level management.
  • 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, KNOT OFFSHORE PRTNRS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Looking at the price performance of KNOP's shares over the past 12 months, there is not much good news to report: the stock is down 42.33%, 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. 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.
  • KNOT OFFSHORE PRTNRS LP's earnings per share declined by 13.5% 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, KNOT OFFSHORE PRTNRS LP increased its bottom line by earning $1.34 versus $0.87 in the prior year. This year, the market expects an improvement in earnings ($1.79 versus $1.34).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 11.9% when compared to the same quarter one year prior, going from $6.42 million to $7.19 million.

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Crestwood Equity Partners

Dividend Yield: 15.20%

Crestwood Equity Partners (NYSE: CEQP) shares currently have a dividend yield of 15.20%.

Crestwood Equity Partners LP provides midstream solutions to customers in the crude oil, natural gas liquids (NGLs), and natural gas sectors of the energy industry in the United States. The company has a P/E ratio of 15.74.

The average volume for Crestwood Equity Partners has been 777,900 shares per day over the past 30 days. Crestwood Equity Partners has a market cap of $674.9 million and is part of the energy industry. Shares are down 57% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Crestwood Equity Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk, generally disappointing historical performance in the stock itself, poor profit margins 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 against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 57.6% when compared to the same quarter one year ago, falling from $19.60 million to $8.30 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 75.53%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 63.63% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • The debt-to-equity ratio is very high at 3.27 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, CEQP's quick ratio is somewhat strong at 1.05, demonstrating the ability to handle short-term liquidity needs.
  • The gross profit margin for CRESTWOOD EQUITY PARTNERS LP is currently lower than what is desirable, coming in at 27.59%. Regardless of CEQP'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 1.13% trails the industry average.
  • CRESTWOOD EQUITY PARTNERS LP 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 company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CRESTWOOD EQUITY PARTNERS LP increased its bottom line by earning $0.32 versus $0.15 in the prior year. For the next year, the market is expecting a contraction of 21.9% in earnings ($0.25 versus $0.32).

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