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."

ZAIS Financial

Dividend Yield: 12.00%

ZAIS Financial (NYSE: ZFC) shares currently have a dividend yield of 12.00%.

Zais Financial Corp. originates, acquires, finances, sells, services, and manages residential mortgage loans in the United States. It originates mortgage loans through its GMFS mortgage banking platform; and acquires performing, re-performing, and newly originated loans through other channels. The company has a P/E ratio of 12.36.

The average volume for ZAIS Financial has been 21,800 shares per day over the past 30 days. ZAIS Financial has a market cap of $106.4 million and is part of the real estate industry. Shares are down 9.3% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates ZAIS Financial 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 73.9% when compared to the same quarter one year ago, falling from $23.17 million to $6.05 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ZAIS FINANCIAL CORP'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 27.14%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 73.68% 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.
  • ZAIS FINANCIAL 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, ZAIS FINANCIAL CORP increased its bottom line by earning $2.91 versus $0.81 in the prior year. For the next year, the market is expecting a contraction of 41.6% in earnings ($1.70 versus $2.91).
  • ZFC, with its decline in revenue, underperformed when compared the industry average of 6.2%. Since the same quarter one year prior, revenues fell by 11.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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Dynagas LNG Partners

Dividend Yield: 11.90%

Dynagas LNG Partners (NYSE: DLNG) shares currently have a dividend yield of 11.90%.

Dynagas LNG Partners LP, through its subsidiaries, operates in the seaborne transportation industry worldwide. The company owns and operates liquefied natural gas (LNG) vessels. The company has a P/E ratio of 8.69.

The average volume for Dynagas LNG Partners has been 70,800 shares per day over the past 30 days. Dynagas LNG Partners has a market cap of $290.6 million and is part of the transportation industry. Shares are down 13.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Dynagas LNG Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • Currently the debt-to-equity ratio of 1.90 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.44, which clearly demonstrates the inability to cover short-term cash needs.
  • Net operating cash flow has decreased to $14.25 million or 23.50% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, DYNAGAS LNG PARTNERS LP has marginally lower results.
  • DLNG'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 35.64%, 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 DYNAGAS LNG PARTNERS LP is currently very high, coming in at 81.42%. Regardless of DLNG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DLNG's net profit margin of 40.23% significantly outperformed against the industry.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, DYNAGAS LNG PARTNERS LP's return on equity exceeds that of both the industry average and the S&P 500.

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OCI Partners

Dividend Yield: 13.70%

OCI Partners (NYSE: OCIP) shares currently have a dividend yield of 13.70%.

OCI Partners LP produces and sells methanol and ammonia in the United States. The company sells its products to industrial users and commercial traders for further processing or distribution. OCI GP LLC operates as the general partner of the company. The company has a P/E ratio of 12.37.

The average volume for OCI Partners has been 87,200 shares per day over the past 30 days. OCI Partners has a market cap of $839.5 million and is part of the chemicals industry. Shares are down 38.5% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates OCI Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, weak operating cash flow, 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 Chemicals industry. The net income has significantly decreased by 67.1% when compared to the same quarter one year ago, falling from $40.93 million to $13.48 million.
  • Currently the debt-to-equity ratio of 1.77 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.38, which clearly demonstrates the inability to cover short-term cash needs.
  • Net operating cash flow has significantly decreased to $12.81 million or 71.95% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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. In comparison to other companies in the Chemicals industry and the overall market on the basis of return on equity, OCI PARTNERS LP has underperformed in comparison with the industry average, but has greatly exceeded that of 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 57.02%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 68.62% 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.

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