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."

Capstead Mortgage

Dividend Yield: 11.90%

Capstead Mortgage (NYSE: CMO) shares currently have a dividend yield of 11.90%.

Capstead Mortgage Corporation operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 8.98.

The average volume for Capstead Mortgage has been 1,152,300 shares per day over the past 30 days. Capstead Mortgage has a market cap of $998.5 million and is part of the real estate industry. Shares are down 15.6% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Capstead Mortgage as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, 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 underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income has significantly decreased by 31.8% when compared to the same quarter one year ago, falling from $36.56 million to $24.94 million.
  • 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CAPSTEAD MORTGAGE CORP's return on equity is below that of both the industry average and the S&P 500.
  • The share price of CAPSTEAD MORTGAGE CORP has not done very well: it is down 19.82% 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.
  • CAPSTEAD MORTGAGE CORP's earnings per share declined by 37.1% in the most recent quarter compared to 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, CAPSTEAD MORTGAGE CORP increased its bottom line by earning $1.33 versus $0.93 in the prior year. For the next year, the market is expecting a contraction of 18.8% in earnings ($1.08 versus $1.33).
  • CMO, with its decline in revenue, underperformed when compared the industry average of 9.7%. Since the same quarter one year prior, revenues fell by 11.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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New York REIT

Dividend Yield: 4.80%

New York REIT (NYSE: NYRT) shares currently have a dividend yield of 4.80%.

New York REIT, Inc. focuses on acquiring commercial real estate, as well as acquiring properties or making other real estate investments that relate to office, retail, multi-family residential, industrial, and hotel property types located primarily in New York City. The company has a P/E ratio of 119.75.

The average volume for New York REIT has been 1,226,700 shares per day over the past 30 days. New York REIT has a market cap of $1.6 billion and is part of the real estate industry. Shares are down 10.4% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates New York REIT as a sell. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • NYRT has underperformed the S&P 500 Index, declining 6.65% from its price level of one year ago. 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.
  • Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, NEW YORK REIT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 178.15% to $1.89 million when compared to the same quarter last year. In addition, NEW YORK REIT INC has also vastly surpassed the industry average cash flow growth rate of 15.97%.
  • NEW YORK REIT INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago.
  • 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 87.1% when compared to the same quarter one year prior, rising from -$67.24 million to -$8.66 million.

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Bank of Nova Scotia

Dividend Yield: 4.70%

Bank of Nova Scotia (NYSE: BNS) shares currently have a dividend yield of 4.70%.

The Bank of Nova Scotia provides various personal, commercial, corporate, and investment banking services in Canada and internationally. The company has a P/E ratio of 9.63.

The average volume for Bank of Nova Scotia has been 904,100 shares per day over the past 30 days. Bank of Nova Scotia has a market cap of $55.1 billion and is part of the banking industry. Shares are down 22.9% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Bank of Nova Scotia 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 underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Commercial Banks industry average. The net income has decreased by 22.0% when compared to the same quarter one year ago, dropping from $2,301.00 million to $1,795.00 million.
  • Looking at the price performance of BNS's shares over the past 12 months, there is not much good news to report: the stock is down 31.76%, 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.
  • 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. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, BANK OF NOVA SCOTIA has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • BANK OF NOVA SCOTIA's earnings per share declined by 21.6% 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, BANK OF NOVA SCOTIA increased its bottom line by earning $5.66 versus $1.29 in the prior year.
  • Net operating cash flow has significantly increased by 289.65% to $17,786.00 million when compared to the same quarter last year. Despite an increase in cash flow of 289.65%, BANK OF NOVA SCOTIA is still growing at a significantly lower rate than the industry average of 2625.79%.

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