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."

Plains GP Holdings

Dividend Yield: 12.50%

Plains GP Holdings (NYSE: PAGP) shares currently have a dividend yield of 12.50%.

Plains GP Holdings, L.P. together with its subsidiaries, owns and operates midstream energy infrastructure in the United States and Canada. It operates through three segments: Transportation, Facilities, and Supply and Logistics. The company has a P/E ratio of 14.00.

The average volume for Plains GP Holdings has been 5,284,700 shares per day over the past 30 days. Plains GP Holdings has a market cap of $4.6 billion and is part of the energy industry. Shares are down 15.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Plains GP Holdings as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, generally disappointing historical performance in the stock itself and poor profit margins.

Highlights from the ratings report include:
  • The debt-to-equity ratio is very high at 6.20 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • Looking at the price performance of PAGP's shares over the past 12 months, there is not much good news to report: the stock is down 73.27%, 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. 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 PLAINS GP HOLDINGS LP is currently extremely low, coming in at 10.37%. Regardless of PAGP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.50% trails the industry average.
  • PAGP, with its decline in revenue, underperformed when compared the industry average of 34.6%. Since the same quarter one year prior, revenues fell by 47.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • PLAINS GP HOLDINGS LP's earnings per share declined by 15.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PLAINS GP HOLDINGS LP increased its bottom line by earning $0.53 versus $0.47 in the prior year. This year, the market expects an improvement in earnings ($0.64 versus $0.53).

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EnLink Midstream

Dividend Yield: 10.30%

EnLink Midstream (NYSE: ENLC) shares currently have a dividend yield of 10.30%.

EnLink Midstream, LLC engages in gathering, transmission, processing, and marketing of natural gas and natural gas liquids (NGLs), condensate, and crude oil in the United States.

The average volume for EnLink Midstream has been 945,900 shares per day over the past 30 days. EnLink Midstream has a market cap of $1.8 billion and is part of the energy industry. Shares are down 31.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates EnLink Midstream as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, 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 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 763.3% when compared to the same quarter one year ago, falling from $29.40 million to -$195.00 million.
  • The debt-to-equity ratio of 1.35 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.38, 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 Oil, Gas & Consumable Fuels industry and the overall market, ENLINK MIDSTREAM LLC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ENLINK MIDSTREAM LLC is rather low; currently it is at 15.95%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -18.28% is significantly below that of the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 69.38%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 755.55% compared to the year-earlier 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.

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NRG Energy

Dividend Yield: 4.50%

NRG Energy (NYSE: NRG) shares currently have a dividend yield of 4.50%.

NRG Energy, Inc., together with its subsidiaries, operates as a power company.

The average volume for NRG Energy has been 7,611,700 shares per day over the past 30 days. NRG Energy has a market cap of $4.1 billion and is part of the utilities industry. Shares are up 16.7% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates NRG Energy as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, 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 Independent Power Producers & Energy Traders industry. The net income has significantly decreased by 5405.9% when compared to the same quarter one year ago, falling from $119.00 million to -$6,314.00 million.
  • The debt-to-equity ratio is very high at 6.47 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, NRG has a quick ratio of 0.66, 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 Independent Power Producers & Energy Traders industry and the overall market, NRG ENERGY INC'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 -$83.00 million or 120.95% 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 44.90%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 9652.38% compared to the year-earlier 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.

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