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."

Air Industries Group

Dividend Yield: 7.50%

Air Industries Group

(AMEX:

AIRI

) shares currently have a dividend yield of 7.50%.

Air Industries Group, an aerospace and defense company, designs and manufactures structural parts and assemblies that focus on flight safety. The company operates through Complex Machining, Aero structures and Electronics, and Turbine Engine Components segments.

The average volume for Air Industries Group has been 6,200 shares per day over the past 30 days. Air Industries Group has a market cap of $60.6 million and is part of the aerospace/defense industry. Shares are down 23.8% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Air Industries Group

as a

hold

. Among the primary strengths of the company is its robust revenue growth -- not just in the most recent periods but in previous quarters as well. At the same time, however, we also find weaknesses including poor profit margins, deteriorating net income and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 1.7%. Since the same quarter one year prior, revenues rose by 39.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • AIR INDUSTRIES GROUP INC's earnings per share declined by 20.0% in the most recent quarter compared to 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, AIR INDUSTRIES GROUP INC reported lower earnings of $0.11 versus $0.64 in the prior year. This year, the market expects an improvement in earnings ($0.19 versus $0.11).
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Aerospace & Defense industry average. The net income has decreased by 11.3% when compared to the same quarter one year ago, dropping from $0.38 million to $0.34 million.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, AIRI has underperformed the S&P 500 Index, declining 19.24% from its price level of one year ago. 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 AIR INDUSTRIES GROUP INC is rather low; currently it is at 19.82%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.59% trails that of the industry average.

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Teekay LNG Partners

Dividend Yield: 12.30%

Teekay LNG Partners

(NYSE:

TGP

) shares currently have a dividend yield of 12.30%.

Teekay LNG Partners L.P. provides marine transportation services for liquefied natural gas (LNG), liquefied petroleum gas (LPG), and crude oil worldwide. The company has a P/E ratio of 9.16.

The average volume for Teekay LNG Partners has been 264,600 shares per day over the past 30 days. Teekay LNG Partners has a market cap of $1.8 billion and is part of the transportation industry. Shares are down 47.2% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Teekay LNG Partners

as a

hold

. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:

  • Net operating cash flow has significantly increased by 109.59% to $85.16 million when compared to the same quarter last year. In addition, TEEKAY LNG PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -25.83%.
  • The gross profit margin for TEEKAY LNG PARTNERS LP is currently very high, coming in at 75.05%. Regardless of TGP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TGP's net profit margin of 7.61% compares favorably to the industry average.
  • TEEKAY LNG PARTNERS LP 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. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, TEEKAY LNG PARTNERS LP reported lower earnings of $2.30 versus $2.49 in the prior year. For the next year, the market is expecting a contraction of 20.9% in earnings ($1.82 versus $2.30).
  • The debt-to-equity ratio of 1.36 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, TGP has a quick ratio of 0.51, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

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Fifth Street Finance

Dividend Yield: 11.20%

Fifth Street Finance

(NASDAQ:

FSC

) shares currently have a dividend yield of 11.20%.

Fifth Street Finance Corp. The company has a P/E ratio of 8.02.

The average volume for Fifth Street Finance has been 1,051,900 shares per day over the past 30 days. Fifth Street Finance has a market cap of $984.4 million and is part of the financial services industry. Shares are down 19.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Fifth Street Finance

as a

hold

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

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Capital Markets industry average. The net income increased by 0.8% when compared to the same quarter one year prior, going from $20.29 million to $20.45 million.
  • The gross profit margin for FIFTH STREET FINANCE CORP is rather high; currently it is at 66.50%. Regardless of FSC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FSC's net profit margin of 29.13% significantly outperformed against the industry.
  • Net operating cash flow has significantly increased by 176.55% to $296.65 million when compared to the same quarter last year. Despite an increase in cash flow of 176.55%, FIFTH STREET FINANCE CORP is still growing at a significantly lower rate than the industry average of 272.40%.
  • Looking at the price performance of FSC's shares over the past 12 months, there is not much good news to report: the stock is down 26.32%, 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. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
  • 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 Capital Markets industry and the overall market, FIFTH STREET FINANCE CORP's return on equity is below that of both the industry average and the S&P 500.

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