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."

Kronos Worldwide

Dividend Yield: 7.80%

Kronos Worldwide (NYSE: KRO) shares currently have a dividend yield of 7.80%.

Kronos Worldwide, Inc. produces and markets titanium dioxide pigments (TiO2) worldwide. The company has a P/E ratio of 20.89.

The average volume for Kronos Worldwide has been 393,400 shares per day over the past 30 days. Kronos Worldwide has a market cap of $895.8 million and is part of the chemicals industry. Shares are down 41.8% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Kronos Worldwide 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, weak operating cash flow 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 Chemicals industry. The net income has significantly decreased by 582.8% when compared to the same quarter one year ago, falling from $33.10 million to -$159.80 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Chemicals industry and the overall market, KRONOS WORLDWIDE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for KRONOS WORLDWIDE INC is rather low; currently it is at 18.82%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -44.36% is significantly below that of the industry average.
  • Net operating cash flow has decreased to $18.30 million or 17.93% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, KRONOS WORLDWIDE INC has marginally lower results.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 38.87%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 575.86% 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.

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Deswell Industries

Dividend Yield: 9.20%

Deswell Industries (NASDAQ: DSWL) shares currently have a dividend yield of 9.20%.

Deswell Industries, Inc. manufactures and sells injection-molded plastic parts and components; and assembles electronic products for original equipment manufacturers and contract manufacturers.

The average volume for Deswell Industries has been 11,400 shares per day over the past 30 days. Deswell Industries has a market cap of $24.6 million and is part of the consumer non-durables industry. Shares are down 15% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Deswell Industries as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, poor profit margins and weak operating cash flow.

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 Electronic Equipment, Instruments & Components industry. The net income has significantly decreased by 7935.7% when compared to the same quarter one year ago, falling from $0.01 million to -$1.10 million.
  • The gross profit margin for DESWELL INDUSTRIES INC is currently extremely low, coming in at 12.22%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -9.73% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$2.30 million or 125.34% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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 Electronic Equipment, Instruments & Components industry and the overall market, DESWELL INDUSTRIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • This stock's share value has moved by only 24.28% over the past year. 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.

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Vanguard Natural Resources

Dividend Yield: 15.50%

Vanguard Natural Resources (NASDAQ: VNR) shares currently have a dividend yield of 15.50%.

Vanguard Natural Resources, LLC, through its subsidiaries, acquires and develops oil and natural gas properties in the United States.

The average volume for Vanguard Natural Resources has been 912,200 shares per day over the past 30 days. Vanguard Natural Resources has a market cap of $785.5 million and is part of the energy industry. Shares are down 40.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Vanguard Natural Resources as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • VANGUARD NATURAL RESOURCES 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. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, VANGUARD NATURAL RESOURCES reported lower earnings of $0.54 versus $0.75 in the prior year. For the next year, the market is expecting a contraction of 48.1% in earnings ($0.28 versus $0.54).
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 16650.6% when compared to the same quarter one year ago, falling from -$4.74 million to -$793.65 million.
  • The debt-to-equity ratio is very high at 3.28 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, VNR has a quick ratio of 0.60, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, VANGUARD NATURAL RESOURCES's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $51.07 million or 32.15% 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.

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