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."

CYS Investments

Dividend Yield: 13.90%

CYS Investments (NYSE: CYS) shares currently have a dividend yield of 13.90%.

CYS Investments, Inc., a specialty finance company, makes leveraged investments in whole-pool residential mortgage pass-through securities where the principal and interest payments are guaranteed. The company has a P/E ratio of 14.67.

The average volume for CYS Investments has been 1,475,700 shares per day over the past 30 days. CYS Investments has a market cap of $1.2 billion and is part of the real estate industry. Shares are down 14.2% year-to-date as of the close of trading on Friday.

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

Highlights from the ratings report include:
  • 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, CYS INVESTMENTS INC's return on equity is below that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $53.64 million or 18.12% 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.
  • CYS has underperformed the S&P 500 Index, declining 17.08% 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.
  • CYS INVESTMENTS INC 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, CYS INVESTMENTS INC turned its bottom line around by earning $2.51 versus -$2.87 in the prior year. For the next year, the market is expecting a contraction of 55.8% in earnings ($1.11 versus $2.51).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 44.2% when compared to the same quarter one year prior, rising from $24.99 million to $36.03 million.

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New Residential Investment

Dividend Yield: 15.10%

New Residential Investment (NYSE: NRZ) shares currently have a dividend yield of 15.10%.

New Residential Investment Corp., a real estate investment trust (REIT), focuses on investing in and managing residential mortgage related assets. It operates through Servicing Related Assets, Residential Securities and Loans, and Other Investments segments. The company has a P/E ratio of 10.01.

The average volume for New Residential Investment has been 2,584,000 shares per day over the past 30 days. New Residential Investment has a market cap of $2.8 billion and is part of the real estate industry. Shares are down 5.5% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates New Residential Investment as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity 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 56.9% when compared to the same quarter one year ago, falling from $126.37 million to $54.53 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, NEW RESIDENTIAL INV CP's return on equity is below that of both the industry average and the S&P 500.
  • NEW RESIDENTIAL INV CP 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, NEW RESIDENTIAL INV CP increased its bottom line by earning $2.52 versus $1.96 in the prior year. For the next year, the market is expecting a contraction of 26.2% in earnings ($1.86 versus $2.52).
  • After a year of stock price fluctuations, the net result is that NRZ's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. 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.
  • NRZ, with its decline in revenue, underperformed when compared the industry average of 6.1%. Since the same quarter one year prior, revenues fell by 22.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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Invesco Mortgage Capital

Dividend Yield: 12.50%

Invesco Mortgage Capital (NYSE: IVR) shares currently have a dividend yield of 12.50%.

Invesco Mortgage Capital Inc., a real estate investment trust, focuses on investing in, financing, and managing residential and commercial mortgage-backed securities and mortgage loans. It invests in residential mortgage-backed securities for which a U.S.

The average volume for Invesco Mortgage Capital has been 1,556,300 shares per day over the past 30 days. Invesco Mortgage Capital has a market cap of $1.5 billion and is part of the real estate industry. Shares are down 16.8% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Invesco Mortgage Capital as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow, 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 25905.6% when compared to the same quarter one year ago, falling from $0.54 million to -$138.83 million.
  • Net operating cash flow has declined marginally to $88.58 million or 3.36% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, INVESCO MORTGAGE CAPITAL INC has marginally lower results.
  • The share price of INVESCO MORTGAGE CAPITAL INC has not done very well: it is down 21.03% 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.
  • INVESCO MORTGAGE CAPITAL INC 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, INVESCO MORTGAGE CAPITAL INC swung to a loss, reporting -$1.98 versus $1.00 in the prior year. This year, the market expects an improvement in earnings ($1.72 versus -$1.98).
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, INVESCO MORTGAGE CAPITAL INC's return on equity significantly trails that of both the industry average and the S&P 500.

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