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."

NuStar GP Holdings

Dividend Yield: 7.50%

NuStar GP Holdings

(NYSE:

NSH

) shares currently have a dividend yield of 7.50%.

NuStar GP Holdings, LLC, through its ownership interests in NuStar Energy L.P., engages in the transportation of petroleum products and anhydrous ammonia; terminalling and storage of petroleum products; and marketing of petroleum products. The company has a P/E ratio of 16.81.

The average volume for NuStar GP Holdings has been 145,800 shares per day over the past 30 days. NuStar GP Holdings has a market cap of $1.3 billion and is part of the energy industry. Shares are down 16.1% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

NuStar GP Holdings

as a

hold

. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:

  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NUSTAR GP HOLDINGS LLC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Net operating cash flow has slightly increased to $17.94 million or 6.83% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -19.65%.
  • NSH's debt-to-equity ratio is very low at 0.08 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that NSH's debt-to-equity ratio is low, the quick ratio, which is currently 0.53, displays a potential problem in covering short-term cash needs.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 1.5% when compared to the same quarter one year ago, dropping from $15.77 million to $15.53 million.
  • NSH'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 36.78%, which is also worse than the performance of the S&P 500 Index. 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.

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FS Investment

Dividend Yield: 9.20%

FS Investment

(NYSE:

FSIC

) shares currently have a dividend yield of 9.20%.

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 9.54.

The average volume for FS Investment has been 803,600 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 down 1.7% year-to-date as of the close of trading on Wednesday.

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TheStreet Recommends

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 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 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.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, FSIC has underperformed the S&P 500 Index, declining 8.57% from its price level of one year ago. 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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PennantPark Floating Rate Capital

Dividend Yield: 9.50%

PennantPark Floating Rate Capital

(NASDAQ:

PFLT

) shares currently have a dividend yield of 9.50%.

PennantPark Floating Rate Capital Ltd. is a business development company. It seeks to make secondary direct, debt, equity, and loan investments. The fund seeks to invest through floating rate loans in private or thinly traded or small market-cap, public middle market companies. The company has a P/E ratio of 8.72.

The average volume for PennantPark Floating Rate Capital has been 119,500 shares per day over the past 30 days. PennantPark Floating Rate Capital has a market cap of $179.2 million and is part of the financial services industry. Shares are down 10.1% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

PennantPark Floating Rate Capital

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

Highlights from the ratings report include:

  • The gross profit margin for PENNANTPARK FLOATING RT CAP is currently very high, coming in at 71.00%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 66.52% significantly outperformed against the industry average.
  • PENNANTPARK FLOATING RT CAP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PENNANTPARK FLOATING RT CAP increased its bottom line by earning $1.38 versus $1.30 in the prior year. For the next year, the market is expecting a contraction of 10.9% in earnings ($1.23 versus $1.38).
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, PFLT has underperformed the S&P 500 Index, declining 15.48% from its price level of one year ago. 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's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Capital Markets industry and the overall market, PENNANTPARK FLOATING RT CAP's return on equity is below that of both the industry average and the S&P 500.

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