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."

Ellington Financial

Dividend Yield: 11.70%

Ellington Financial

(NYSE:

EFC

) shares currently have a dividend yield of 11.70%.

Ellington Financial LLC, a specialty finance company, acquires and manages mortgage-related assets, including residential mortgage backed securities backed by prime jumbo, Alt-A, manufactured housing and subprime residential mortgage loans, and residential mortgage-backed securities.

The average volume for Ellington Financial has been 66,400 shares per day over the past 30 days. Ellington Financial has a market cap of $563.3 million and is part of the real estate industry. Shares are up 2% year-to-date as of the close of trading on Wednesday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreet Ratings rates

Ellington Financial

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 feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:

  • EFC, with its decline in revenue, slightly underperformed the industry average of 13.7%. Since the same quarter one year prior, revenues fell by 17.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for ELLINGTON FINANCIAL LLC is rather high; currently it is at 69.20%. Regardless of EFC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EFC's net profit margin of -105.00% significantly underperformed when compared to the industry average.
  • The share price of ELLINGTON FINANCIAL LLC has not done very well: it is down 6.84% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • 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, ELLINGTON FINANCIAL LLC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Net operating cash flow has significantly decreased to -$19.00 million or 105.61% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

Redwood

Dividend Yield: 7.80%

Redwood

(NYSE:

RWT

) shares currently have a dividend yield of 7.80%.

Redwood Trust, Inc., together with its subsidiaries, focuses on investing in mortgage- and other real estate-related assets; and engaging in residential and commercial mortgage banking activities in the United States. The company has a P/E ratio of 12.32.

The average volume for Redwood has been 370,800 shares per day over the past 30 days. Redwood has a market cap of $1.1 billion and is part of the real estate industry. Shares are up 8.3% year-to-date as of the close of trading on Wednesday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreet Ratings rates

Redwood

as a

hold

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

Highlights from the ratings report include:

  • Net operating cash flow has significantly increased by 188.99% to $105.98 million when compared to the same quarter last year. In addition, REDWOOD TRUST INC has also vastly surpassed the industry average cash flow growth rate of 9.08%.
  • REDWOOD TRUST INC's earnings per share declined by 6.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, REDWOOD TRUST INC increased its bottom line by earning $1.15 versus $1.13 in the prior year. This year, the market expects an improvement in earnings ($1.34 versus $1.15).
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, RWT has underperformed the S&P 500 Index, declining 10.46% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • 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 Real Estate Investment Trusts (REITs) industry. The net income has decreased by 18.5% when compared to the same quarter one year ago, dropping from $14.80 million to $12.06 million.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

Hercules Capital

Dividend Yield: 9.50%

Hercules Capital

(NYSE:

HTGC

) shares currently have a dividend yield of 9.50%.

Hercules Technology Growth Capital, Inc. The company has a P/E ratio of 11.07.

The average volume for Hercules Capital has been 232,700 shares per day over the past 30 days. Hercules Capital has a market cap of $962.1 million and is part of the real estate industry. Shares are up 7.3% year-to-date as of the close of trading on Wednesday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreet Ratings rates

Hercules Capital

as a

hold

. The company's strengths can be seen in multiple areas, such as its robust 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:

  • The revenue growth greatly exceeded the industry average of 13.7%. Since the same quarter one year prior, revenues rose by 19.8%. 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 HERCULES CAPITAL INC is currently very high, coming in at 81.37%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 36.71% significantly outperformed against the industry average.
  • Net operating cash flow has increased to -$82.35 million or 27.79% when compared to the same quarter last year. Despite an increase in cash flow of 27.79%, HERCULES CAPITAL INC is still growing at a significantly lower rate than the industry average of 100.83%.
  • 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 34.8% when compared to the same quarter one year ago, falling from $21.92 million to $14.30 million.
  • 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. When compared to other companies in the Capital Markets industry and the overall market, HERCULES CAPITAL INC's return on equity is below that of both the industry average and the S&P 500.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

Other helpful dividend tools from TheStreet: