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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."

Ellington Financial

Dividend Yield: 11.50%

Ellington Financial

(NYSE:

EFC

) shares currently have a dividend yield of 11.50%.

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 71,500 shares per day over the past 30 days. Ellington Financial has a market cap of $572.8 million and is part of the real estate industry. Shares are up 2.7% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Ellington Financial

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TheStreet Recommends

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:

  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 24.3%. 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 13.75% 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.
  • 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 220.4% when compared to the same quarter one year ago, falling from $19.26 million to -$23.20 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, ELLINGTON FINANCIAL LLC's return on equity significantly trails that of both the industry average and the S&P 500.

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Sotherly Hotels

Dividend Yield: 7.20%

Sotherly Hotels

(NASDAQ:

SOHO

) shares currently have a dividend yield of 7.20%.

SoTHERLY Hotels Inc. is a self-managed and self-administered lodging REIT focused on the acquisition, renovation, upbranding and repositioning of upscale to upper upscale full-service hotels in the Mid-Atlantic and Southern United States. The company has a P/E ratio of 12.27.

The average volume for Sotherly Hotels has been 26,800 shares per day over the past 30 days. Sotherly Hotels has a market cap of $75.2 million and is part of the real estate industry. Shares are down 16.9% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Sotherly Hotels

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • SOHO's revenue growth has slightly outpaced the industry average of 11.9%. Since the same quarter one year prior, revenues rose by 20.2%. 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 SOTHERLY HOTELS INC is rather high; currently it is at 54.30%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, SOHO's net profit margin of 1.27% significantly trails the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 37.38%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 40.00% compared to the year-earlier 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.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income has decreased by 16.0% when compared to the same quarter one year ago, dropping from $0.58 million to $0.48 million.

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Fortress Investment Group

Dividend Yield: 7.20%

Fortress Investment Group

(NYSE:

FIG

) shares currently have a dividend yield of 7.20%.

Fortress Investment Group LLC is a publicly owned investment manager. The company has a P/E ratio of 31.44.

The average volume for Fortress Investment Group has been 820,400 shares per day over the past 30 days. Fortress Investment Group has a market cap of $1.9 billion 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

Fortress Investment Group

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth 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, 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 24.5%. Since the same quarter one year prior, revenues slightly increased by 2.2%. 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 -$135.94 million or 11.46% when compared to the same quarter last year. In addition, FORTRESS INVESTMENT GRP LLC has also vastly surpassed the industry average cash flow growth rate of -198.91%.
  • FORTRESS INVESTMENT GRP LLC 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, FORTRESS INVESTMENT GRP LLC reported lower earnings of $0.28 versus $0.38 in the prior year. This year, the market expects an improvement in earnings ($0.74 versus $0.28).
  • 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 124.6% when compared to the same quarter one year ago, falling from $34.71 million to -$8.53 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. When compared to other companies in the Capital Markets industry and the overall market, FORTRESS INVESTMENT GRP LLC's return on equity is below that of both the industry average and the S&P 500.

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