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 All American Pipeline

Dividend Yield: 11.60%

Plains All American Pipeline (NYSE: PAA) shares currently have a dividend yield of 11.60%.

Plains All American Pipeline, L.P., through with its subsidiaries, engages in the transportation, storage, terminalling, and marketing of crude oil, natural gas liquids (NGL), natural gas, and refined products in the United States and Canada. The company has a P/E ratio of 31.68.

The average volume for Plains All American Pipeline has been 4,136,200 shares per day over the past 30 days. Plains All American Pipeline has a market cap of $9.6 billion and is part of the energy industry. Shares are up 0% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Plains All American Pipeline as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, weak operating cash flow, disappointing return on equity, generally disappointing historical performance in the stock itself and poor profit margins.

Highlights from the ratings report include:
  • The debt-to-equity ratio of 1.44 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, PAA has a quick ratio of 0.53, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has significantly decreased to $122.00 million or 83.19% 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.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PLAINS ALL AMER PIPELNE -LP's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of 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 47.77%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 64.17% 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.
  • The gross profit margin for PLAINS ALL AMER PIPELNE -LP is currently extremely low, coming in at 10.37%. Regardless of PAA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, PAA's net profit margin of 4.92% compares favorably to the industry average.

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NRG Energy

Dividend Yield: 4.20%

NRG Energy (NYSE: NRG) shares currently have a dividend yield of 4.20%.

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

The average volume for NRG Energy has been 7,058,500 shares per day over the past 30 days. NRG Energy has a market cap of $4.3 billion and is part of the utilities industry. Shares are up 10.4% year-to-date as of the close of trading on Wednesday.

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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 42.63%, 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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Extended Stay America

Dividend Yield: 4.30%

Extended Stay America (NYSE: STAY) shares currently have a dividend yield of 4.30%.

Extended Stay America, Inc. develops, owns, and operates hotels in the United States and Canada. The company has a P/E ratio of 37.07.

The average volume for Extended Stay America has been 827,300 shares per day over the past 30 days. Extended Stay America has a market cap of $3.2 billion and is part of the leisure industry. Shares are down 4.6% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Extended Stay America as a sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, generally high debt management risk and weak operating cash flow.

Highlights from the ratings report include:
  • STAY has underperformed the S&P 500 Index, declining 22.45% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
  • The debt-to-equity ratio is very high at 3.16 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • Net operating cash flow has declined marginally to $63.66 million or 5.21% 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.
  • 48.19% is the gross profit margin for EXTENDED STAY AMERICA INC which we consider to be strong. Regardless of STAY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, STAY's net profit margin of -1.39% significantly underperformed when compared to the industry average.
  • 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 Hotels, Restaurants & Leisure industry and the overall market on the basis of return on equity, EXTENDED STAY AMERICA INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

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