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."

National Oilwell Varco

Dividend Yield: 6.20%

National Oilwell Varco (NYSE: NOV) shares currently have a dividend yield of 6.20%.

National Oilwell Varco, Inc. designs, manufactures, and sells equipment and components used in oil and gas drilling, completion, and production operations; and provides oilfield services to the upstream oil and gas industry worldwide.

The average volume for National Oilwell Varco has been 7,374,000 shares per day over the past 30 days. National Oilwell Varco has a market cap of $11.1 billion and is part of the energy industry. Shares are down 11.7% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates National Oilwell Varco as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, 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 Energy Equipment & Services industry. The net income has significantly decreased by 356.0% when compared to the same quarter one year ago, falling from $595.00 million to -$1,523.00 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 Energy Equipment & Services industry and the overall market on the basis of return on equity, NATIONAL OILWELL VARCO INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The gross profit margin for NATIONAL OILWELL VARCO INC is currently lower than what is desirable, coming in at 25.83%. It has decreased from the same quarter the previous year.
  • Net operating cash flow has decreased to $614.00 million or 16.57% when compared to the same quarter last year. Despite a decrease in cash flow NATIONAL OILWELL VARCO INC is still fairing well by exceeding its industry average cash flow growth rate of -42.17%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 37.79%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 392.08% 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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Energy Company of Minas Gerais ADR

Dividend Yield: 5.40%

Energy Company of Minas Gerais ADR (NYSE: CIG) shares currently have a dividend yield of 5.40%.

Companhia Energetica de Minas Gerais S.A., through its subsidiaries, engages in the generation, transformation, transmission, distribution, and sale of electric energy primarily in Minas Gerais, Brazil.

The average volume for Energy Company of Minas Gerais ADR has been 4,446,600 shares per day over the past 30 days. Energy Company of Minas Gerais ADR has a market cap of $2.7 billion and is part of the utilities industry. Shares are up 37.3% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Energy Company of Minas Gerais ADR 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, weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • CIA ENERGETICA DE MINAS's earnings per share declined by 50.0% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, CIA ENERGETICA DE MINAS reported lower earnings of $1.41 versus $1.84 in the prior year. For the next year, the market is expecting a contraction of 75.5% in earnings ($0.35 versus $1.41).
  • 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 Electric Utilities industry. The net income has significantly decreased by 47.7% when compared to the same quarter one year ago, falling from $349.44 million to $182.71 million.
  • Net operating cash flow has significantly decreased to $314.63 million or 56.11% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for CIA ENERGETICA DE MINAS is rather low; currently it is at 22.92%. It has decreased significantly from the same period last year. Regardless of the weak results of the gross profit margin, the net profit margin of 10.28% is above 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 44.75%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 50.00% 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.

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Enbridge Energy Partners

Dividend Yield: 13.40%

Enbridge Energy Partners (NYSE: EEP) shares currently have a dividend yield of 13.40%.

Enbridge Energy Partners, L.P. owns and operates a diversified portfolio of crude oil and natural gas transportation systems in the United States. It operates through two segments, Liquids and Natural Gas. The company has a P/E ratio of 69.52.

The average volume for Enbridge Energy Partners has been 1,806,500 shares per day over the past 30 days. Enbridge Energy Partners has a market cap of $7.4 billion and is part of the energy industry. Shares are down 25.6% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Enbridge Energy Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, weak operating cash flow, disappointing return on equity 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 against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 87.3% when compared to the same quarter one year ago, falling from $240.40 million to $30.50 million.
  • Currently the debt-to-equity ratio of 1.62 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.22, which clearly demonstrates the inability to cover short-term cash needs.
  • Net operating cash flow has significantly decreased to -$23.50 million or 107.22% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, ENBRIDGE ENERGY PRTNRS -LP has 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 49.13%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 127.45% 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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