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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."

PennantPark Floating Rate Capital

Dividend Yield: 9.90%

PennantPark Floating Rate Capital

(NASDAQ:

PFLT

) shares currently have a dividend yield of 9.90%.

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 8.36.

The average volume for PennantPark Floating Rate Capital has been 128,700 shares per day over the past 30 days. PennantPark Floating Rate Capital has a market cap of $308.5 million and is part of the financial services industry. Shares are up 1.4% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

PennantPark Floating Rate Capital

TheStreet Recommends

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 deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:

  • The gross profit margin for PENNANTPARK FLOATING RT CAP is currently very high, coming in at 84.49%. 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 15.59% trails the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.7%. Since the same quarter one year prior, revenues slightly dropped by 5.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • PENNANTPARK FLOATING RT CAP 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, PENNANTPARK FLOATING RT CAP reported lower earnings of $0.82 versus $1.38 in the prior year. This year, the market expects an improvement in earnings ($1.02 versus $0.82).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Capital Markets industry. The net income has significantly decreased by 46.7% when compared to the same quarter one year ago, falling from $2.28 million to $1.22 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. 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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Gas Natural

Dividend Yield: 7.30%

Gas Natural

(AMEX:

EGAS

) shares currently have a dividend yield of 7.30%.

Gas Natural Inc. distributes and sells natural gas to residential, commercial, and industrial customers. The company operates through Natural Gas and Marketing & Production segments. The company has a P/E ratio of 49.47.

The average volume for Gas Natural has been 21,200 shares per day over the past 30 days. Gas Natural has a market cap of $77.9 million and is part of the utilities industry. Shares are up 1.1% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Gas Natural

as a

hold

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

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Gas Utilities industry. The net income increased by 176.4% when compared to the same quarter one year prior, rising from -$1.48 million to $1.13 million.
  • The current debt-to-equity ratio, 0.58, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.22 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.0%. Since the same quarter one year prior, revenues slightly dropped by 3.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • 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. Compared to other companies in the Gas Utilities industry and the overall market on the basis of return on equity, GAS NATURAL INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Net operating cash flow has significantly decreased to -$0.14 million or 171.50% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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Compass Diversified Holdings

Dividend Yield: 9.10%

Compass Diversified Holdings

(NYSE:

CODI

) shares currently have a dividend yield of 9.10%.

Compass Diversified Holdings is a private equity firm specializing in acquisitions, buyouts, and middle market investments. It seeks to invest in manufacturing, distribution, consumer products, and business services sectors. The firm prefers to invest in companies based in North America. The company has a P/E ratio of 65.96.

The average volume for Compass Diversified Holdings has been 116,600 shares per day over the past 30 days. Compass Diversified Holdings has a market cap of $859.6 million and is part of the conglomerates industry. Shares are down 2.6% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Compass Diversified Holdings

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 15.2%. Since the same quarter one year prior, revenues rose by 47.3%. 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.
  • Despite currently having a low debt-to-equity ratio of 0.37, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that CODI's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.58 is high and demonstrates strong liquidity.
  • 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 Diversified Financial Services industry and the overall market on the basis of return on equity, COMPASS DIVERSIFIED HOLDINGS underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Net operating cash flow has significantly decreased to $14.20 million or 59.23% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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