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."

Fifth Street Senior Floating Rate

Dividend Yield: 11.00%

Fifth Street Senior Floating Rate

(NASDAQ:

FSFR

) shares currently have a dividend yield of 11.00%.

Fifth Street Senior Floating Rate Corp. is a business development company specializing in providing financing solutions in the form of floating rate senior secured loans to mid-sized companies. The company has a P/E ratio of 8.21.

The average volume for Fifth Street Senior Floating Rate has been 68,900 shares per day over the past 30 days. Fifth Street Senior Floating Rate has a market cap of $241.9 million and is part of the financial services industry. Shares are down 3.5% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Fifth Street Senior Floating Rate

as a

hold

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

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 24.3%. Since the same quarter one year prior, revenues rose by 16.4%. 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.
  • Net operating cash flow has significantly increased by 196.77% to $21.37 million when compared to the same quarter last year. In addition, FIFTH STREET SR FLTG RATE CP has also vastly surpassed the industry average cash flow growth rate of -146.35%.
  • The gross profit margin for FIFTH STREET SR FLTG RATE CP is rather high; currently it is at 61.56%. Regardless of FSFR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FSFR's net profit margin of -5.00% significantly underperformed when compared to 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 109.9% when compared to the same quarter one year ago, falling from $6.69 million to -$0.66 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 on the basis of return on equity, FIFTH STREET SR FLTG RATE CP underperformed against that of the industry average and is significantly less than that of the S&P 500.

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WhiteHorse Finance

Dividend Yield: 12.30%

WhiteHorse Finance

(NASDAQ:

WHF

) shares currently have a dividend yield of 12.30%.

Whitehorse Finance, LLC is a business development company. The company has a P/E ratio of 7.78.

The average volume for WhiteHorse Finance has been 34,400 shares per day over the past 30 days. WhiteHorse Finance has a market cap of $210.7 million and is part of the financial services industry. Shares are up 0.4% year-to-date as of the close of trading on Monday.

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TheStreet Recommends

TheStreet Ratings rates

WhiteHorse Finance

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 disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 24.3%. Since the same quarter one year prior, revenues rose by 19.0%. 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 WHITEHORSE FINANCE INC is rather high; currently it is at 64.71%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 41.25% significantly outperformed against the industry average.
  • Net operating cash flow has significantly decreased to -$4.76 million or 142.83% when compared to the same quarter last year. Despite a decrease in cash flow of 142.83%, WHITEHORSE FINANCE INC is in line with the industry average cash flow growth rate of -146.35%.
  • 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, WHITEHORSE FINANCE INC underperformed against that of the industry average and is significantly less than that of the S&P 500.

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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 68,500 shares per day over the past 30 days. Ellington Financial has a market cap of $562.6 million and is part of the real estate industry. Shares are up 2.5% year-to-date as of the close of trading on Monday.

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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:

  • 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.
  • Net operating cash flow has significantly decreased to -$19.00 million or 105.61% when compared to the same quarter last year. Despite a decrease in cash flow ELLINGTON FINANCIAL LLC is still fairing well by exceeding its industry average cash flow growth rate of -146.35%.
  • 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 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.

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