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."

Ellington Residential Mortgage REIT

Dividend Yield: 14.70%

Ellington Residential Mortgage REIT (NYSE: EARN) shares currently have a dividend yield of 14.70%.

Ellington Residential Mortgage REIT, a real estate investment trust, specializes in acquiring, investing in, and managing residential mortgage-and real estate-related assets. The company has a P/E ratio of 17.99.

The average volume for Ellington Residential Mortgage REIT has been 48,500 shares per day over the past 30 days. Ellington Residential Mortgage REIT has a market cap of $111.9 million and is part of the real estate industry. Shares are down 24% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Ellington Residential Mortgage REIT 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 98.3% when compared to the same quarter one year ago, falling from $11.05 million to $0.19 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, ELLINGTON RESIDENTIAL MTG's return on equity is below 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 25.34%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 98.34% 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.
  • EARN, with its decline in revenue, underperformed when compared the industry average of 9.8%. Since the same quarter one year prior, revenues fell by 15.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for ELLINGTON RESIDENTIAL MTG is currently very high, coming in at 87.15%. Regardless of EARN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EARN's net profit margin of 1.93% is significantly lower than the industry average.

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Full Circle Capital

Dividend Yield: 13.90%

Full Circle Capital (NASDAQ: FULL) shares currently have a dividend yield of 13.90%.

Full Circle Capital Corporation is a business development company specializing in debt and equity securities of smaller and lower middle-market companies.

The average volume for Full Circle Capital has been 78,800 shares per day over the past 30 days. Full Circle Capital has a market cap of $70.4 million and is part of the financial services industry. Shares are down 33% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Full Circle Capital 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 FULL CIRCLE CAPITAL CORP is currently lower than what is desirable, coming in at 33.67%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -34.61% is significantly below that of the industry average.
  • FULL'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 50.33%, 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.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market, FULL CIRCLE CAPITAL CORP'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 71.08% to -$6.95 million when compared to the same quarter last year. In addition, FULL CIRCLE CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -422.49%.
  • FULL CIRCLE CAPITAL CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, FULL CIRCLE CAPITAL CORP continued to lose money by earning -$0.41 versus -$0.83 in the prior year. This year, the market expects an improvement in earnings ($0.44 versus -$0.41).

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Enable Midstream Partners

Dividend Yield: 10.00%

Enable Midstream Partners (NYSE: ENBL) shares currently have a dividend yield of 10.00%.

Enable Midstream Partners, LP owns, operates, and develops natural gas and crude oil infrastructure assets in the United States. It operates through two segments, Gathering and Processing, and Transportation and Storage. The company has a P/E ratio of 8.52.

The average volume for Enable Midstream Partners has been 185,100 shares per day over the past 30 days. Enable Midstream Partners has a market cap of $2.7 billion and is part of the energy industry. Shares are down 31.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Enable Midstream Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow, 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:
  • Net operating cash flow has decreased to $96.00 million or 48.38% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 49.06%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 37.93% 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 gross profit margin for ENABLE MIDSTREAM PARTNERS LP is currently lower than what is desirable, coming in at 28.64%. Regardless of ENBL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, ENBL's net profit margin of 13.05% compares favorably to the industry average.
  • ENABLE MIDSTREAM PARTNERS LP's earnings per share declined by 37.9% 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, ENABLE MIDSTREAM PARTNERS LP increased its bottom line by earning $1.27 versus $0.28 in the prior year. For the next year, the market is expecting a contraction of 32.3% in earnings ($0.86 versus $1.27).
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 35.8% when compared to the same quarter one year ago, falling from $120.00 million to $77.00 million.

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