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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."

BG Staffing

Dividend Yield: 8.30%

BG Staffing

(AMEX:

BGSF

) shares currently have a dividend yield of 8.30%.

BG Staffing, Inc. operates as a temporary staffing company in the United States. It operates through three segments: Light Industrial, Multifamily, and IT Staffing. The company has a P/E ratio of 31.84.

The average volume for BG Staffing has been 1,200 shares per day over the past 30 days. BG Staffing has a market cap of $89.4 million and is part of the diversified services industry. Shares are down 5.8% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

BG Staffing

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TheStreet Recommends

as a

hold

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and poor profit margins.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 4.8%. Since the same quarter one year prior, revenues rose by 16.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • BG STAFFING INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago.
  • When compared to other companies in the Professional Services industry and the overall market, BG STAFFING INC's return on equity is below that of both the industry average and the S&P 500.
  • After a year of stock price fluctuations, the net result is that BGSF's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • The debt-to-equity ratio of 1.11 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, BGSF's quick ratio is somewhat strong at 1.39, demonstrating the ability to handle short-term liquidity needs.

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Garrison Capital

Dividend Yield: 9.80%

Garrison Capital

(NASDAQ:

GARS

) shares currently have a dividend yield of 9.80%.

Garrison Capital Inc. is a business development company specializing in investments primarily in the debt and equity of middle market companies. The company has a P/E ratio of 6.57.

The average volume for Garrison Capital has been 46,500 shares per day over the past 30 days. Garrison Capital has a market cap of $240.2 million and is part of the financial services industry. Shares are down 0.8% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Garrison Capital

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, 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 feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.7%. Since the same quarter one year prior, revenues slightly increased by 2.4%. 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.
  • The gross profit margin for GARRISON CAPITAL INC is rather high; currently it is at 68.38%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 29.47% significantly outperformed against the industry average.
  • 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 57.2% when compared to the same quarter one year ago, falling from $9.06 million to $3.88 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. When compared to other companies in the Capital Markets industry and the overall market, GARRISON CAPITAL INC's return on equity is below that of both the industry average and the S&P 500.

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Textainer Group Holdings

Dividend Yield: 11.00%

Textainer Group Holdings

(NYSE:

TGH

) shares currently have a dividend yield of 11.00%.

Textainer Group Holdings Limited, together with its subsidiaries, engages in the purchase, ownership, management, leasing, and disposal of a fleet of intermodal containers worldwide. It operates through three segments: Container Ownership, Container Management, and Container Resale. The company has a P/E ratio of 5.63.

The average volume for Textainer Group Holdings has been 512,000 shares per day over the past 30 days. Textainer Group Holdings has a market cap of $971.9 million and is part of the diversified services industry. Shares are down 52.4% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Textainer Group Holdings

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, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:

  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Trading Companies & Distributors industry average. The net income increased by 21.9% when compared to the same quarter one year prior, going from $33.01 million to $40.26 million.
  • The gross profit margin for TEXTAINER GROUP HOLDINGS LTD is currently very high, coming in at 88.12%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 29.13% significantly outperformed against the industry average.
  • Net operating cash flow has slightly increased to $88.21 million or 4.85% when compared to the same quarter last year. Despite an increase in cash flow, TEXTAINER GROUP HOLDINGS LTD's cash flow growth rate is still lower than the industry average growth rate of 28.23%.
  • 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 Trading Companies & Distributors industry and the overall market on the basis of return on equity, TEXTAINER GROUP HOLDINGS LTD has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • TGH'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 50.15%, 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.

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