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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."

Pennant Park Investment Corporation

Dividend Yield: 15.80%

Pennant Park Investment Corporation

(NASDAQ:

PNNT

) shares currently have a dividend yield of 15.80%.

PennantPark Investment Corporation is a publicly listed business development firm specializing in direct and mezzanine investments in middle market companies. It invests in the form of mezzanine debt, senior secured loans, and equity investments. The company has a P/E ratio of 4.28.

The average volume for Pennant Park Investment Corporation has been 509,200 shares per day over the past 30 days. Pennant Park Investment Corporation has a market cap of $518.1 million and is part of the financial services industry. Shares are down 25.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Pennant Park Investment Corporation

TheStreet Recommends

as a

hold

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

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 Capital Markets industry. The net income increased by 225.7% when compared to the same quarter one year prior, rising from -$1.10 million to $1.39 million.
  • PENNANTPARK INVESTMENT CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PENNANTPARK INVESTMENT CORP swung to a loss, reporting -$0.13 versus $1.66 in the prior year. This year, the market expects an improvement in earnings ($1.01 versus -$0.13).
  • PNNT'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 35.22%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • 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, PENNANTPARK INVESTMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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Medley Capital

Dividend Yield: 16.30%

Medley Capital

(NYSE:

MCC

) shares currently have a dividend yield of 16.30%.

Medley Capital Corporation is a business development company. The fund seeks to invest in privately negotiated debt and equity securities of small and middle market companies. The company has a P/E ratio of 6.70.

The average volume for Medley Capital has been 345,200 shares per day over the past 30 days. Medley Capital has a market cap of $425.5 million and is part of the financial services industry. Shares are down 19.7% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Medley Capital

as a

hold

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

Highlights from the ratings report include:

  • Net operating cash flow has significantly increased by 129.46% to $19.06 million when compared to the same quarter last year. Despite an increase in cash flow of 129.46%, MEDLEY CAPITAL CORP is still growing at a significantly lower rate than the industry average of 271.57%.
  • The gross profit margin for MEDLEY CAPITAL CORP is rather high; currently it is at 65.07%. Regardless of MCC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MCC's net profit margin of 23.28% compares favorably to the industry average.
  • 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, MEDLEY CAPITAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 34.84%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 57.57% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

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United Development Funding IV

Dividend Yield: 9.30%

United Development Funding IV

(NASDAQ:

UDF

) shares currently have a dividend yield of 9.30%.

United Development Funding IV operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 9.57.

The average volume for United Development Funding IV has been 110,900 shares per day over the past 30 days. United Development Funding IV has a market cap of $539.8 million and is part of the real estate industry. Shares are down 4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

United Development Funding IV

as a

hold

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share and increase in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow 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 6.1%. Since the same quarter one year prior, revenues rose by 18.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • UNITED DEV FUNDING IV has improved earnings per share by 6.8% in the most recent quarter compared to the same quarter a year ago.
  • When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, UNITED DEV FUNDING IV's return on equity is below that of both the industry average and the S&P 500.
  • UDF has underperformed the S&P 500 Index, declining 8.62% 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.
  • Net operating cash flow has decreased to $12.74 million or 10.77% 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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