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: 10.60%

Capstead Mortgage (NYSE: CMO) shares currently have a dividend yield of 10.60%.

Capstead Mortgage Corporation operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 9.56.

The average volume for Capstead Mortgage has been 1,033,400 shares per day over the past 30 days. Capstead Mortgage has a market cap of $943.9 million and is part of the real estate industry. Shares are down 19.5% 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 35.0% when compared to the same quarter one year ago, falling from $32.39 million to $21.07 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 23.12% 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 40.0% 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 24.8% in earnings ($1.00 versus $1.33).
  • CMO, with its decline in revenue, underperformed when compared the industry average of 6.2%. Since the same quarter one year prior, revenues slightly dropped by 7.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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Bank of Nova Scotia

Dividend Yield: 4.50%

Bank of Nova Scotia (NYSE: BNS) shares currently have a dividend yield of 4.50%.

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 9.96.

The average volume for Bank of Nova Scotia has been 943,900 shares per day over the past 30 days. Bank of Nova Scotia has a market cap of $57.0 billion and is part of the banking industry. Shares are down 16.9% 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.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, BNS has underperformed the S&P 500 Index, declining 21.30% 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.
  • 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.
  • The gross profit margin for BANK OF NOVA SCOTIA is currently very high, coming in at 73.62%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.69% is above that of the industry average.

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Crescent Point Energy

Dividend Yield: 6.50%

Crescent Point Energy (NYSE: CPG) shares currently have a dividend yield of 6.50%.

Crescent Point Energy Corp. acquires, explores, develops, and produces oil and natural gas properties in Western Canada and the United States. The company has a P/E ratio of 63.50.

The average volume for Crescent Point Energy has been 1,015,500 shares per day over the past 30 days. Crescent Point Energy has a market cap of $6.9 billion and is part of the energy industry. Shares are down 35.4% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Crescent Point Energy as a sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 59.02%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 320.83% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, CPG is still more expensive than most of the other companies in its industry.
  • 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 343.9% when compared to the same quarter one year ago, falling from $98.59 million to -$240.45 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 Oil, Gas & Consumable Fuels industry and the overall market, CRESCENT POINT ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $491.64 million or 23.95% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, CRESCENT POINT ENERGY CORP has marginally lower results.
  • 48.94% is the gross profit margin for CRESCENT POINT ENERGY CORP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, CPG's net profit margin of -58.47% significantly underperformed when compared to the industry average.

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