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."

CYS Investments

Dividend Yield: 13.80%

CYS Investments (NYSE: CYS) shares currently have a dividend yield of 13.80%.

CYS Investments, Inc., a specialty finance company, makes leveraged investments in whole-pool residential mortgage pass-through securities where the principal and interest payments are guaranteed. The company has a P/E ratio of 17.11.

The average volume for CYS Investments has been 1,685,800 shares per day over the past 30 days. CYS Investments has a market cap of $1.2 billion and is part of the real estate industry. Shares are down 13.4% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates CYS Investments 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 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 161.3% when compared to the same quarter one year ago, falling from $158.38 million to -$97.04 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CYS INVESTMENTS INC's return on equity is below that of both the industry average and the S&P 500.
  • The share price of CYS INVESTMENTS INC has not done very well: it is down 13.91% 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.
  • CYS INVESTMENTS 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. 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, CYS INVESTMENTS INC turned its bottom line around by earning $2.51 versus -$2.87 in the prior year. For the next year, the market is expecting a contraction of 54.6% in earnings ($1.14 versus $2.51).
  • The gross profit margin for CYS INVESTMENTS INC is currently very high, coming in at 92.55%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -120.31% is in-line with the industry average.

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VEREIT

Dividend Yield: 6.80%

VEREIT (NYSE: VER) shares currently have a dividend yield of 6.80%.

VEREIT, Inc. is a publicly owned real estate investment trust. It 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 average volume for VEREIT has been 6,191,700 shares per day over the past 30 days. VEREIT has a market cap of $7.6 billion and is part of the real estate industry. Shares are down 10.4% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates VEREIT as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 94.7% when compared to the same quarter one year ago, falling from -$54.72 million to -$106.52 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, VEREIT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for VEREIT INC is currently extremely low, coming in at 0.55%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -27.05% is significantly below that of the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 34.87%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 40.00% 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.
  • VEREIT INC's earnings per share declined by 40.0% 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, VEREIT INC continued to lose money by earning -$1.44 versus -$2.44 in the prior year. This year, the market expects an improvement in earnings (-$0.20 versus -$1.44).

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Bank of Nova Scotia

Dividend Yield: 4.80%

Bank of Nova Scotia (NYSE: BNS) shares currently have a dividend yield of 4.80%.

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 9.24.

The average volume for Bank of Nova Scotia has been 972,500 shares per day over the past 30 days. Bank of Nova Scotia has a market cap of $52.9 billion and is part of the banking industry. Shares are down 24.5% year-to-date as of the close of trading on Wednesday.

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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 32.28%, 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 2804.12%.

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