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."

Ellington Residential Mortgage REIT

Dividend Yield: 14.10%

Ellington Residential Mortgage REIT (NYSE: EARN) shares currently have a dividend yield of 14.10%.

Ellington Residential Mortgage REIT, a real estate investment trust, specializes in acquiring, investing in, and managing residential mortgage-and real estate-related assets.

The average volume for Ellington Residential Mortgage REIT has been 42,000 shares per day over the past 30 days. Ellington Residential Mortgage REIT has a market cap of $116.5 million and is part of the real estate industry. Shares are down 19.7% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Ellington Residential Mortgage REIT as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 236.3% when compared to the same quarter one year ago, falling from $3.53 million to -$4.82 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ELLINGTON RESIDENTIAL MTG's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$3.89 million or 428.37% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 25.11%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 235.89% 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.
  • EARN, with its decline in revenue, slightly underperformed the industry average of 6.1%. Since the same quarter one year prior, revenues slightly dropped by 1.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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JAVELIN Mortgage Investment

Dividend Yield: 16.50%

JAVELIN Mortgage Investment (NYSE: JMI) shares currently have a dividend yield of 16.50%.

JAVELIN Mortgage Investment Corp., a real estate investment trust (REIT), invests primarily in fixed rate agency, and fixed rate and hybrid adjustable rate non-agency residential mortgage-backed securities in the United States. The company qualifies as a REIT for federal income tax purposes.

The average volume for JAVELIN Mortgage Investment has been 59,900 shares per day over the past 30 days. JAVELIN Mortgage Investment has a market cap of $77.9 million and is part of the real estate industry. Shares are down 35.4% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates JAVELIN Mortgage Investment 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 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 351.5% when compared to the same quarter one year ago, falling from $6.57 million to -$16.53 million.
  • Net operating cash flow has decreased to $6.79 million or 14.01% 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.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 43.24%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 352.72% 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.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, JAVELIN MORTGAGE INVESTMENT's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for JAVELIN MORTGAGE INVESTMENT is currently very high, coming in at 72.52%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, JMI's net profit margin of -247.27% significantly underperformed when compared to the industry average.

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Birner Dental Management Services

Dividend Yield: 7.80%

Birner Dental Management Services (NASDAQ: BDMS) shares currently have a dividend yield of 7.80%.

Birner Dental Management Services, Inc. provides business services to dental group practices in Colorado, New Mexico, and Arizona.

The average volume for Birner Dental Management Services has been 700 shares per day over the past 30 days. Birner Dental Management Services has a market cap of $21.1 million and is part of the diversified services industry. Shares are down 31.7% year-to-date as of the close of trading on Monday.

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

Highlights from the ratings report include:
  • The debt-to-equity ratio is very high at 4.38 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.21, which clearly demonstrates the inability to cover short-term cash needs.
  • 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 Health Care Providers & Services industry and the overall market, BIRNER DENTAL MGMT SVCS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for BIRNER DENTAL MGMT SVCS INC is rather low; currently it is at 20.39%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.43% trails that of the industry average.
  • BDMS has underperformed the S&P 500 Index, declining 14.33% 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.
  • BIRNER DENTAL MGMT SVCS INC has improved earnings per share by 45.5% 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, BIRNER DENTAL MGMT SVCS INC swung to a loss, reporting -$0.49 versus $0.05 in the prior year.

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