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."

Capitala Finance

Dividend Yield: 13.60%

Capitala Finance

(NASDAQ:

CPTA

) shares currently have a dividend yield of 13.60%.

Capitala Finance Corp. is a Business Development Company specializing in investments in traditional mezzanine, senior subordinated and unitranche debt, second-lien loans, equity securities issued by lower and traditional middle-market companies, and small and middle-market companies. The company has a P/E ratio of 76.89.

The average volume for Capitala Finance has been 76,300 shares per day over the past 30 days. Capitala Finance has a market cap of $223.5 million and is part of the financial services industry. Shares are down 24.7% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Capitala Finance

as a

hold

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

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 6.7%. Since the same quarter one year prior, revenues rose by 20.4%. 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 CAPITALA FINANCE CORP is rather high; currently it is at 66.28%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 32.76% significantly outperformed against the industry average.
  • CAPITALA FINANCE CORP's earnings per share declined by 35.4% 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CAPITALA FINANCE CORP swung to a loss, reporting -$0.27 versus $1.13 in the prior year. This year, the market expects an improvement in earnings ($1.57 versus -$0.27).
  • Net operating cash flow has significantly decreased to -$25.26 million or 535.71% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 25.64%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 35.41% compared to 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.

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CSP

Dividend Yield: 7.90%

CSP

(NASDAQ:

CSPI

) shares currently have a dividend yield of 7.90%.

CSP Inc., together with its subsidiaries, develops and markets information technology (IT) integration solutions and high-performance cluster computer systems to industrial, commercial, and defense customers in the Americas, Europe, and Asia.

The average volume for CSP has been 4,800 shares per day over the past 30 days. CSP has a market cap of $20.4 million and is part of the computer software & services industry. Shares are down 24% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

TheStreet Recommends

CSP

as a

hold

. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:

  • CSPI 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. To add to this, CSPI has a quick ratio of 1.69, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Despite the weak revenue results, CSPI has outperformed against the industry average of 21.7%. Since the same quarter one year prior, revenues slightly dropped by 1.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • CSP INC 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, CSP INC increased its bottom line by earning $0.38 versus $0.10 in the prior year.
  • The gross profit margin for CSP INC is rather low; currently it is at 24.31%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.11% significantly trails the industry average.
  • Net operating cash flow has decreased to $2.18 million or 49.01% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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Hercules Technology Growth Capital

Dividend Yield: 11.50%

Hercules Technology Growth Capital

(NYSE:

HTGC

) shares currently have a dividend yield of 11.50%.

Hercules Technology Growth Capital, Inc. The company has a P/E ratio of 9.12.

The average volume for Hercules Technology Growth Capital has been 402,400 shares per day over the past 30 days. Hercules Technology Growth Capital has a market cap of $779.5 million and is part of the real estate industry. Shares are down 26.6% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Hercules Technology Growth Capital

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, 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, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:

  • HTGC's revenue growth has slightly outpaced the industry average of 6.7%. Since the same quarter one year prior, revenues rose by 12.1%. 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.
  • Net operating cash flow has increased to -$66.31 million or 20.07% when compared to the same quarter last year. In addition, HERCULES TECH GROWTH CAP INC has also vastly surpassed the industry average cash flow growth rate of -425.92%.
  • The gross profit margin for HERCULES TECH GROWTH CAP INC is currently very high, coming in at 78.69%. Regardless of HTGC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.21% trails 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 79.1% when compared to the same quarter one year ago, falling from $13.19 million to $2.75 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, HERCULES TECH GROWTH CAP INC's return on equity is below that of both the industry average and the S&P 500.

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