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.

TST Recommends

The following pages contain our analysis of 3 stocks with substantial yields, that ultimately, we have rated "Hold."

Mesa Royalty

Dividend Yield: 10.50%

Mesa Royalty

(NYSE:

MTR

) shares currently have a dividend yield of 10.50%.

Mesa Royalty Trust holds net overriding royalty interests in various oil and gas properties in the United States. It has interests in properties located in the Hugoton field of Kansas; the San Juan Basin field of New Mexico and Colorado; and the Yellow Creek field of Wyoming. The company has a P/E ratio of 2.12.

The average volume for Mesa Royalty has been 9,300 shares per day over the past 30 days. Mesa Royalty has a market cap of $13.8 million and is part of the financial services industry. Shares are down 70.3% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Mesa Royalty

as a

hold

. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and deteriorating net income.

Highlights from the ratings report include:

  • MTR has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 11.92, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for MESA ROYALTY TRUST is currently very high, coming in at 100.00%. MTR has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, MTR's net profit margin of 102.74% significantly outperformed against the industry.
  • MESA ROYALTY TRUST 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. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, MESA ROYALTY TRUST increased its bottom line by earning $3.50 versus $1.85 in the prior year.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 76.30%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 76.84% 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 change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 76.8% when compared to the same quarter one year ago, falling from $1.77 million to $0.41 million.

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KCAP Financial

Dividend Yield: 14.90%

KCAP Financial

(NASDAQ:

KCAP

) shares currently have a dividend yield of 14.90%.

KCAP Financial, Inc. is a private equity and venture capital firm specializing in mid market, buyouts, and mezzanine investments. It focuses on mature and middle market companies.

The average volume for KCAP Financial has been 191,400 shares per day over the past 30 days. KCAP Financial has a market cap of $149.5 million and is part of the financial services industry. Shares are down 40.9% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

KCAP Financial

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 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 came in higher than the industry average of 5.7%. Since the same quarter one year prior, revenues slightly increased by 8.7%. 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 KCAP FINANCIAL INC is currently very high, coming in at 81.05%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -136.25% is in-line with the industry average.
  • Net operating cash flow has slightly increased to $11.02 million or 6.26% when compared to the same quarter last year. Despite an increase in cash flow of 6.26%, KCAP FINANCIAL INC is still growing at a significantly lower rate than the industry average of 272.65%.
  • 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 294.9% when compared to the same quarter one year ago, falling from $8.24 million to -$16.05 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. Compared to other companies in the Capital Markets industry and the overall market, KCAP FINANCIAL INC's return on equity significantly trails that of both the industry average and the S&P 500.

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Alcentra Capital

Dividend Yield: 11.30%

Alcentra Capital

(NASDAQ:

ABDC

) shares currently have a dividend yield of 11.30%.

Alcentra Capital Corporation is a business development company specializing in investments in lower middle-market companies. The company has a P/E ratio of 8.22.

The average volume for Alcentra Capital has been 35,100 shares per day over the past 30 days. Alcentra Capital has a market cap of $162.2 million and is part of the financial services industry. Shares are down 6.7% year-to-date as of the close of trading on Tuesday.

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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 5.7%. 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 272.65%.
  • The share price of ALCENTRA CAPITAL CORP has not done very well: it is down 6.39% 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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