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."

Fidus Investment

Dividend Yield: 10.10%

Fidus Investment

(NASDAQ:

FDUS

) shares currently have a dividend yield of 10.10%.

Fidus Investment Corporation operates as an externally managed, closed-end, and non-diversified management investment company. The company provides customized debt and equity financing solutions to lower middle-market companies in the United States. The company has a P/E ratio of 6.98.

The average volume for Fidus Investment has been 50,800 shares per day over the past 30 days. Fidus Investment has a market cap of $252.5 million and is part of the financial services industry. Shares are up 13.3% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Fidus Investment

as a

hold

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

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 1.9%. Since the same quarter one year prior, revenues rose by 19.7%. 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 FIDUS INVESTMENT CORP is rather high; currently it is at 69.72%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 40.47% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 82.55% to -$4.98 million when compared to the same quarter last year. Despite an increase in cash flow of 82.55%, FIDUS INVESTMENT CORP is still growing at a significantly lower rate than the industry average of 149.14%.
  • FIDUS INVESTMENT CORP's earnings per share declined by 10.5% 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, FIDUS INVESTMENT CORP reported lower earnings of $1.34 versus $2.01 in the prior year. This year, the market expects an improvement in earnings ($1.70 versus $1.34).
  • FDUS is off 5.16% from its price level of one year ago, reflecting a combination of (a) the general market trend and (b) the company's own weaknesses, including its lower earnings per share 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.

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Alcentra Capital

Dividend Yield: 11.80%

Alcentra Capital

(NASDAQ:

ABDC

) shares currently have a dividend yield of 11.80%.

Alcentra Capital Corporation is a business development company specializing in investments in lower middle-market companies. The company has a P/E ratio of 7.87.

The average volume for Alcentra Capital has been 41,700 shares per day over the past 30 days. Alcentra Capital has a market cap of $155.3 million and is part of the financial services industry. Shares are up 0.3% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Alcentra 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 unimpressive growth in 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 1.9%. Since the same quarter one year prior, revenues rose by 45.1%. 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.
  • The gross profit margin for ALCENTRA CAPITAL CORP is currently very high, coming in at 77.23%. It has increased significantly from the same period last year. Along with this, the net profit margin of 38.25% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 77.69% to -$1.59 million when compared to the same quarter last year. Despite an increase in cash flow of 77.69%, ALCENTRA CAPITAL CORP is still growing at a significantly lower rate than the industry average of 149.14%.
  • The share price of ALCENTRA CAPITAL CORP has not done very well: it is down 12.59% 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 58.8% when compared to the same quarter one year ago, falling from $7.90 million to $3.25 million.

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Teekay Offshore Partners

Dividend Yield: 7.80%

Teekay Offshore Partners

(NYSE:

TOO

) shares currently have a dividend yield of 7.80%.

Teekay Offshore Partners L.P. provides marine transportation, oil production, storage, towage, and floating accommodation services to the offshore oil industry in the North Sea and Brazil. The company has a P/E ratio of 6.08.

The average volume for Teekay Offshore Partners has been 1,414,800 shares per day over the past 30 days. Teekay Offshore Partners has a market cap of $604.6 million and is part of the transportation industry. Shares are down 12.5% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Teekay Offshore Partners

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 generally higher debt management risk and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 34.7%. Since the same quarter one year prior, revenues rose by 30.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • TEEKAY OFFSHORE PARTNERS LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, TEEKAY OFFSHORE PARTNERS LP turned its bottom line around by earning $0.36 versus -$0.22 in the prior year. This year, the market expects an improvement in earnings ($1.69 versus $0.36).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, TEEKAY OFFSHORE PARTNERS LP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • TOO'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 74.37%, 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.
  • The debt-to-equity ratio is very high at 2.88 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.48, which clearly demonstrates the inability to cover short-term cash needs.

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