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."

Western Refining Logistics

Dividend Yield: 7.80%

Western Refining Logistics (NYSE: WNRL) shares currently have a dividend yield of 7.80%.

Western Refining Logistics, LP engages in the ownership, acquisition, development, and operation of terminals, storage tanks, pipelines, and other logistics assets in the Southwestern United States. The company has a P/E ratio of 4.69.

The average volume for Western Refining Logistics has been 115,000 shares per day over the past 30 days. Western Refining Logistics has a market cap of $948.5 million and is part of the energy industry. Shares are down 11.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Western Refining Logistics 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 poor profit margins.

Highlights from the ratings report include:
  • WNRL'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 27.32%, 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • The gross profit margin for WESTERN REFINING LGS LP is currently extremely low, coming in at 4.92%. Regardless of WNRL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, WNRL's net profit margin of 2.44% compares favorably to the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 33.0%. Since the same quarter one year prior, revenues fell by 26.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Net operating cash flow has slightly increased to $17.69 million or 7.23% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -39.95%.
  • WESTERN REFINING LGS LP has improved earnings per share by 29.6% 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, WESTERN REFINING LGS LP turned its bottom line around by earning $1.16 versus -$0.91 in the prior year. This year, the market expects an improvement in earnings ($2.04 versus $1.16).

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Pennant Park Investment

Dividend Yield: 20.00%

Pennant Park Investment (NASDAQ: PNNT) shares currently have a dividend yield of 20.00%.

PennantPark Investment Corporation is a publicly listed business development firm specializing in direct and mezzanine investments in middle market companies. It invests in the form of mezzanine debt, senior secured loans, and equity investments. The company has a P/E ratio of 3.37.

The average volume for Pennant Park Investment has been 539,300 shares per day over the past 30 days. Pennant Park Investment has a market cap of $401.8 million and is part of the financial services industry. Shares are down 9.4% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Pennant Park Investment 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 Capital Markets industry. The net income has significantly decreased by 70.2% when compared to the same quarter one year ago, falling from -$23.95 million to -$40.76 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 Capital Markets industry and the overall market, PENNANTPARK INVESTMENT CORP's return on equity significantly trails 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 43.47%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 75.00% 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.
  • PENNANTPARK INVESTMENT 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. 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, PENNANTPARK INVESTMENT CORP swung to a loss, reporting -$0.13 versus $1.66 in the prior year. This year, the market expects an improvement in earnings ($1.05 versus -$0.13).
  • PNNT, with its decline in revenue, slightly underperformed the industry average of 4.2%. Since the same quarter one year prior, revenues fell by 10.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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Vanguard Natural Resources

Dividend Yield: 17.80%

Vanguard Natural Resources (NASDAQ: VNR) shares currently have a dividend yield of 17.80%.

Vanguard Natural Resources, LLC, through its subsidiaries, acquires and develops oil and natural gas properties in the United States.

The average volume for Vanguard Natural Resources has been 2,265,000 shares per day over the past 30 days. Vanguard Natural Resources has a market cap of $263.5 million and is part of the energy industry. Shares are down 36.6% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Vanguard Natural Resources 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 generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • VANGUARD NATURAL RESOURCES 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 year. We anticipate that this should continue in the coming year. During the past fiscal year, VANGUARD NATURAL RESOURCES reported lower earnings of $0.54 versus $0.75 in the prior year. For the next year, the market is expecting a contraction of 25.9% in earnings ($0.40 versus $0.54).
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 505.1% when compared to the same quarter one year ago, falling from $114.10 million to -$462.28 million.
  • The debt-to-equity ratio is very high at 22.82 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, VNR has a quick ratio of 0.52, this demonstrates the lack of ability of the company to cover short-term liquidity 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 Oil, Gas & Consumable Fuels industry and the overall market, VANGUARD NATURAL RESOURCES's return on equity significantly trails 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 88.74%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 514.61% 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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