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."

FS Investment

Dividend Yield: 8.80%

FS Investment

(NYSE:

FSIC

) shares currently have a dividend yield of 8.80%.

FS Investment Corporation is a business development company specializing in investments in debt securities. It seeks to purchase interests in loans through secondary market transactions or directly from the target companies as primary market investments. The company has a P/E ratio of 9.91.

The average volume for FS Investment has been 748,900 shares per day over the past 30 days. FS Investment has a market cap of $2.4 billion and is part of the financial services industry. Shares are up 1.6% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

FS Investment

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 find that the growth in the company's net income has been quite unimpressive.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 6.9%. Since the same quarter one year prior, revenues rose by 22.4%. 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 FS INVESTMENT CORP is currently very high, coming in at 76.20%. It has increased significantly from the same period last year. Along with this, the net profit margin of 35.00% significantly outperformed against the industry average.
  • When compared to other companies in the Capital Markets industry and the overall market, FS INVESTMENT CORP's return on equity is below that of both the industry average and the S&P 500.
  • After a year of stock price fluctuations, the net result is that FSIC's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. 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 underperformed when compared to that of the S&P 500 and the Capital Markets industry average. The net income has significantly decreased by 25.4% when compared to the same quarter one year ago, falling from $69.31 million to $51.71 million.

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North European Oil Royalty

Dividend Yield: 14.00%

North European Oil Royalty

(NYSE:

NRT

) shares currently have a dividend yield of 14.00%.

North European Oil Royalty Trust, a grantor trust, holds overriding royalty rights covering gas and oil production in concessions or leases in the Federal Republic of Germany. It holds these rights under contracts with German exploration and development subsidiaries of ExxonMobil Corp. The company has a P/E ratio of 7.28.

The average volume for North European Oil Royalty has been 25,800 shares per day over the past 30 days. North European Oil Royalty has a market cap of $94.4 million and is part of the financial services industry. Shares are down 17.7% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

North European Oil Royalty

as a

hold

. At the same time, however, we also find weaknesses including feeble growth in the company's earnings per share and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • Despite the weak revenue results, NRT has outperformed against the industry average of 34.5%. Since the same quarter one year prior, revenues fell by 22.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 22.8% when compared to the same quarter one year ago, dropping from $4.29 million to $3.31 million.
  • Looking at the price performance of NRT's shares over the past 12 months, there is not much good news to report: the stock is down 54.54%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.
  • NORTH EUROPEAN OIL RTY TR's earnings per share declined by 23.4% 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 two years. During the past fiscal year, NORTH EUROPEAN OIL RTY TR reported lower earnings of $1.97 versus $2.26 in the prior year.

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New Mountain Finance

Dividend Yield: 9.20%

New Mountain Finance

(NYSE:

NMFC

) shares currently have a dividend yield of 9.20%.

New Mountain Finance Corporation is a Business Development Company specializing in investments in middle market companies and debt securities at various levels of the capital structure, including first and second lien debt, unsecured notes, bonds, and mezzanine securities. The company has a P/E ratio of 10.24.

The average volume for New Mountain Finance has been 202,600 shares per day over the past 30 days. New Mountain Finance has a market cap of $857.9 million and is part of the financial services industry. Shares are down 1.5% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

New Mountain Finance

as a

hold

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

Highlights from the ratings report include:

  • NMFC's revenue growth has slightly outpaced the industry average of 6.9%. Since the same quarter one year prior, revenues rose by 12.4%. 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 NEW MOUNTAIN FINANCE CORP is rather high; currently it is at 68.60%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 53.45% significantly outperformed against the industry average.
  • After a year of stock price fluctuations, the net result is that NMFC's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • 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, NEW MOUNTAIN FINANCE CORP's return on equity is below that of both the industry average and the S&P 500.

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