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.

TST Recommends

The following pages contain our analysis of 3 stocks with substantial yields, that ultimately, we have rated "Hold."

Apollo Investment

Dividend Yield: 14.00%

Apollo Investment

(NASDAQ:

AINV

) shares currently have a dividend yield of 14.00%.

Apollo Investment Corporation is business development company specializing in middle market companies. It provides direct equity capital, mezzanine and senior secured loans, unsecured debt, and subordinated debt and loans. It also seeks to invest in PIPES transactions.

The average volume for Apollo Investment has been 1,044,100 shares per day over the past 30 days. Apollo Investment has a market cap of $1.3 billion and is part of the financial services industry. Shares are up 10.3% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Apollo Investment

as a

hold

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

Highlights from the ratings report include:

  • The gross profit margin for APOLLO INVESTMENT CORP is currently very high, coming in at 72.58%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -27.41% is in-line with the industry average.
  • Net operating cash flow has slightly increased to $120.73 million or 6.36% when compared to the same quarter last year. Despite an increase in cash flow of 6.36%, APOLLO INVESTMENT CORP is still growing at a significantly lower rate than the industry average of 92.40%.
  • AINV, with its decline in revenue, slightly underperformed the industry average of 13.2%. Since the same quarter one year prior, revenues fell by 16.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • 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 99.5% when compared to the same quarter one year ago, falling from -$11.73 million to -$23.40 million.
  • 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. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, APOLLO INVESTMENT CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.

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BlackRock Capital Investment

Dividend Yield: 10.00%

BlackRock Capital Investment

(NASDAQ:

BKCC

) shares currently have a dividend yield of 10.00%.

BlackRock Capital Investment Corporation, formerly known as BlackRock Kelso Capital Corporation, is a Business Development Company specializing in investments in middle market companies. The fund invests in all industries. The company has a P/E ratio of 5.85.

The average volume for BlackRock Capital Investment has been 414,300 shares per day over the past 30 days. BlackRock Capital Investment has a market cap of $607.3 million and is part of the financial services industry. Shares are down 11.1% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

BlackRock Capital Investment

as a

hold

. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:

  • The gross profit margin for BLACKROCK CAPITAL INVT CORP is currently very high, coming in at 74.60%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -127.94% is in-line with the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 13.2%. Since the same quarter one year prior, revenues slightly dropped by 3.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • BLACKROCK CAPITAL INVT 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, BLACKROCK CAPITAL INVT CORP reported lower earnings of $0.54 versus $1.70 in the prior year. This year, the market expects an improvement in earnings ($1.02 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 Capital Markets industry. The net income has significantly decreased by 268.5% when compared to the same quarter one year ago, falling from $22.66 million to -$38.18 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 on the basis of return on equity, BLACKROCK CAPITAL INVT CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.

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Evolving Systems

Dividend Yield: 8.50%

Evolving Systems

(NASDAQ:

EVOL

) shares currently have a dividend yield of 8.50%.

Evolving Systems, Inc. provides software solutions and services to the wireless, wireline, and cable markets in the United Kingdom, Nigeria, Mexico, and internationally. The company has a P/E ratio of 20.80.

The average volume for Evolving Systems has been 21,900 shares per day over the past 30 days. Evolving Systems has a market cap of $61.4 million and is part of the computer software & services industry. Shares are down 5.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Evolving Systems

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, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:

  • EVOL's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.17, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for EVOLVING SYSTEMS INC is currently very high, coming in at 77.64%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, EVOL's net profit margin of 6.58% significantly trails the industry average.
  • Net operating cash flow has significantly decreased to -$0.66 million or 123.10% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much 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 Software industry and the overall market, EVOLVING SYSTEMS INC's return on equity is below that of both the industry average and the S&P 500.

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