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: 12.30%

ZAIS Financial (NYSE: ZFC) shares currently have a dividend yield of 12.30%.

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 93.07.

The average volume for ZAIS Financial has been 44,700 shares per day over the past 30 days. ZAIS Financial has a market cap of $103.9 million and is part of the real estate industry. Shares are down 13.6% year-to-date as of the close of trading on Monday.

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World Point Terminals

Dividend Yield: 8.90%

World Point Terminals (NYSE: WPT) shares currently have a dividend yield of 8.90%.

World Point Terminals, LP owns, operates, develops, and acquires terminals and other assets for the storage of light refined products, heavy refined products, and crude oil in the East Coast, Gulf Coast, and Midwest regions of the United States. The company has a P/E ratio of 14.87.

The average volume for World Point Terminals has been 30,300 shares per day over the past 30 days. World Point Terminals has a market cap of $471.7 million and is part of the energy industry. Shares are up 4% year-to-date as of the close of trading on Friday.

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

Highlights from the ratings report include:
  • Looking at the price performance of WPT's shares over the past 12 months, there is not much good news to report: the stock is down 32.46%, 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.
  • WORLD POINT TERMINALS's earnings per share declined by 20.0% 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, WORLD POINT TERMINALS increased its bottom line by earning $0.98 versus $0.76 in the prior year. For the next year, the market is expecting a contraction of 6.1% in earnings ($0.92 versus $0.98).
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 16.1% when compared to the same quarter one year ago, dropping from $8.33 million to $6.99 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, WORLD POINT TERMINALS's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • Despite the weak revenue results, WPT has significantly outperformed against the industry average of 33.0%. Since the same quarter one year prior, revenues slightly dropped by 0.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

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Medley Management

Dividend Yield: 15.20%

Medley Management (NYSE: MDLY) shares currently have a dividend yield of 15.20%.

Medley Management Inc. is an investment holding company and operate and control all of the business and affairs of Medley LLC and its subsidiaries. Medley Management Inc. is based in New York, New York. The company has a P/E ratio of 9.25.

The average volume for Medley Management has been 34,200 shares per day over the past 30 days. Medley Management has a market cap of $154.6 million and is part of the financial services industry. Shares are down 3.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Medley Management as a sell. Among the areas we feel are negative, one of the most important has been unimpressive growth in net income over time.

Highlights from the ratings report include:
  • The change in net income from the same quarter one year ago has exceeded that of the Capital Markets industry average, but is less than that of the S&P 500. The net income has significantly decreased by 28.0% when compared to the same quarter one year ago, falling from $0.38 million to $0.27 million.
  • MDLY, with its decline in revenue, underperformed when compared the industry average of 4.2%. Since the same quarter one year prior, revenues fell by 23.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • MEDLEY MANAGEMENT INC's earnings per share declined by 20.0% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($0.66 versus $0.24).
  • Looking at the price performance of MDLY's shares over the past 12 months, there is not much good news to report: the stock is down 48.03%, 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.
  • The gross profit margin for MEDLEY MANAGEMENT INC is currently very high, coming in at 73.49%. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, MDLY's net profit margin of 1.72% significantly trails the industry average.

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