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."

Quad/Graphics

Dividend Yield: 12.50%

Quad/Graphics (NYSE: QUAD) shares currently have a dividend yield of 12.50%.

Quad/Graphics, Inc., together with its subsidiaries, provides print and media solutions in the United States, Europe, and Latin America.

The average volume for Quad/Graphics has been 306,500 shares per day over the past 30 days. Quad/Graphics has a market cap of $340.6 million and is part of the diversified services industry. Shares are down 59.5% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Quad/Graphics 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 poor profit margins.

Highlights from the ratings report include:
  • The debt-to-equity ratio is very high at 3.37 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, QUAD maintains a poor quick ratio of 0.85, which illustrates the inability to avoid short-term cash problems.
  • 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 Commercial Services & Supplies industry and the overall market, QUAD/GRAPHICS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for QUAD/GRAPHICS INC is rather low; currently it is at 19.52%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -47.76% is significantly below that of the industry average.
  • QUAD/GRAPHICS 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. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, QUAD/GRAPHICS INC reported lower earnings of $0.36 versus $0.60 in the prior year. For the next year, the market is expecting a contraction of 22.2% in earnings ($0.28 versus $0.36).
  • 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 Commercial Services & Supplies industry. The net income has significantly decreased by 2363.1% when compared to the same quarter one year ago, falling from $24.40 million to -$552.20 million.

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Gladstone Commercial

Dividend Yield: 10.20%

Gladstone Commercial (NASDAQ: GOOD) shares currently have a dividend yield of 10.20%.

Gladstone Commercial Corporation operates as a real estate investment trust (REIT) in the United States. It engages in investing in and owning net leased industrial and commercial real properties, and making long-term industrial and commercial mortgage loans. The company has a P/E ratio of 77.47.

The average volume for Gladstone Commercial has been 135,300 shares per day over the past 30 days. Gladstone Commercial has a market cap of $324.8 million and is part of the real estate industry. Shares are down 13.5% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Gladstone Commercial as a sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, unimpressive growth in net income and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, GOOD has underperformed the S&P 500 Index, declining 14.72% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 141.1% when compared to the same quarter one year ago, falling from $0.23 million to -$0.10 million.
  • GLADSTONE COMMERCIAL CORP's earnings per share declined by 20.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GLADSTONE COMMERCIAL CORP reported poor results of -$0.61 versus -$0.22 in the prior year. This year, the market expects an improvement in earnings (-$0.16 versus -$0.61).
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, GLADSTONE COMMERCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • 40.43% is the gross profit margin for GLADSTONE COMMERCIAL CORP which we consider to be strong. Regardless of GOOD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GOOD's net profit margin of -0.44% significantly underperformed when compared to the industry average.

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Resource Capital

Dividend Yield: 12.80%

Resource Capital (NYSE: RSO) shares currently have a dividend yield of 12.80%.

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 348,600 shares per day over the past 30 days. Resource Capital has a market cap of $417.1 million and is part of the real estate industry. Shares are down 31.9% 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 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'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 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.
  • Looking at the price performance of RSO's shares over the past 12 months, there is not much good news to report: the stock is down 36.66%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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's earnings per share declined by 12.5% 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, 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 110.7% in earnings (-$0.15 versus $1.36).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 0.1% when compared to the same quarter one year prior, going from $12.87 million to $12.89 million.
  • The gross profit margin for RESOURCE CAPITAL CORP is rather high; currently it is at 65.36%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.92% is above that of the industry average.

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