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 "Hold."

Arlington Asset Investment

Dividend Yield: 19.30%

Arlington Asset Investment

(NYSE:

AI

) shares currently have a dividend yield of 19.30%.

Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The company has a P/E ratio of 4.29.

The average volume for Arlington Asset Investment has been 305,500 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $297.6 million and is part of the real estate industry. Shares are down 4.5% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Arlington Asset Investment

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • AI's very impressive revenue growth greatly exceeded the industry average of 1.9%. Since the same quarter one year prior, revenues leaped by 1148.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for ARLINGTON ASSET INVESTMENT is currently very high, coming in at 88.43%. It has increased significantly from the same period last year. Along with this, the net profit margin of 57.54% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $29.79 million or 32.79% when compared to the same quarter last year. Despite an increase in cash flow of 32.79%, ARLINGTON ASSET INVESTMENT is still growing at a significantly lower rate than the industry average of 149.14%.
  • AI'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 44.27%, 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.
  • 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, ARLINGTON ASSET INVESTMENT's return on equity significantly trails that of both the industry average and the S&P 500.

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Costamare

Dividend Yield: 13.10%

Costamare

(NYSE:

CMRE

) shares currently have a dividend yield of 13.10%.

COSTAMARE INC. owns and charters containerships to liner companies worldwide. The company has a P/E ratio of 5.10.

The average volume for Costamare has been 293,600 shares per day over the past 30 days. Costamare has a market cap of $667.5 million and is part of the transportation industry. Shares are down 14.5% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Costamare

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 17.6%. Since the same quarter one year prior, revenues slightly increased by 1.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Marine industry and the overall market, COSTAMARE INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has slightly increased to $65.13 million or 4.14% when compared to the same quarter last year. Despite an increase in cash flow, COSTAMARE INC's cash flow growth rate is still lower than the industry average growth rate of 22.54%.
  • CMRE'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 51.67%, 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. 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.
  • 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 0.46, which clearly demonstrates the inability to cover short-term cash needs.

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BP Prudhoe Bay Royalty

Dividend Yield: 17.10%

BP Prudhoe Bay Royalty

(NYSE:

BPT

) shares currently have a dividend yield of 17.10%.

BP Prudhoe Bay Royalty Trust operates as a grantor trust in the United States. The company holds overriding royalty interest comprising a non-operational interest in minerals in the Prudhoe Bay oil field located on the North Slope of Alaska. The company has a P/E ratio of 5.32.

The average volume for BP Prudhoe Bay Royalty has been 536,300 shares per day over the past 30 days. BP Prudhoe Bay Royalty has a market cap of $302.0 million and is part of the energy industry. Shares are down 42.1% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

BP Prudhoe Bay Royalty

as a

hold

. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:

  • BPT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.35, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for BP PRUDHOE BAY ROYALTY TRUST is currently very high, coming in at 100.00%. BPT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, BPT's net profit margin of 98.87% significantly outperformed against the industry.
  • BP PRUDHOE BAY ROYALTY TRUST 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. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, BP PRUDHOE BAY ROYALTY TRUST increased its bottom line by earning $10.60 versus $9.04 in the prior year.
  • 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, BP PRUDHOE BAY ROYALTY TRUST's return on equity significantly exceeds 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 75.34%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 51.48% 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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