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."

American Midstream Partners

Dividend Yield: 17.60%

American Midstream Partners (NYSE: AMID) shares currently have a dividend yield of 17.60%.

American Midstream Partners, LP engages in gathering, treating, processing, and transporting natural gas, fractionating natural gas liquids (NGLs), and storing specialty chemical products in the Gulf Coast and Southeast regions of the United States.

The average volume for American Midstream Partners has been 275,000 shares per day over the past 30 days. American Midstream Partners has a market cap of $244.7 million and is part of the energy industry. Shares are down 42.4% year-to-date as of the close of trading on Friday.

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

Highlights from the ratings report include:
  • 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, AMERICAN MIDSTREAM PRTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • AMID's debt-to-equity ratio of 0.86 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.15 is very low and demonstrates very weak liquidity.
  • AMID'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 62.85%, 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.
  • The gross profit margin for AMERICAN MIDSTREAM PRTNRS LP is rather low; currently it is at 20.87%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -3.05% trails the industry average.
  • 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 decreased by 23.8% when compared to the same quarter one year ago, dropping from -$1.67 million to -$2.06 million.

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Resource Capital

Dividend Yield: 19.90%

Resource Capital (NYSE: RSO) shares currently have a dividend yield of 19.90%.

Resource Capital Corp., a diversified real estate investment trust, primarily focuses on originating, holding, and managing commercial mortgage loans and other commercial real estate-related debt and equity investments in the United States.

The average volume for Resource Capital has been 398,900 shares per day over the past 30 days. Resource Capital has a market cap of $431.7 million and is part of the real estate industry. Shares are down 36.3% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Resource Capital 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 238.0% when compared to the same quarter one year ago, falling from $18.04 million to -$24.90 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RESOURCE CAPITAL CORP's return on equity significantly trails 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 38.13%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 318.18% 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.
  • RESOURCE CAPITAL 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, RESOURCE CAPITAL CORP increased its bottom line by earning $1.36 versus $1.32 in the prior year. For the next year, the market is expecting a contraction of 91.2% in earnings ($0.12 versus $1.36).
  • Net operating cash flow has significantly increased by 727.08% to $33.11 million when compared to the same quarter last year. In addition, RESOURCE CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -72.17%.

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Deswell Industries

Dividend Yield: 9.90%

Deswell Industries (NASDAQ: DSWL) shares currently have a dividend yield of 9.90%.

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 12,400 shares per day over the past 30 days. Deswell Industries has a market cap of $22.6 million and is part of the consumer non-durables industry. Shares are down 22.3% year-to-date as of the close of trading on Friday.

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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 31.89% over the past year. 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.

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