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."

WhiteHorse Finance

Dividend Yield: 14.80%

WhiteHorse Finance

(NASDAQ:

WHF

) shares currently have a dividend yield of 14.80%.

Whitehorse Finance, LLC is a business development company. The company has a P/E ratio of 6.49.

The average volume for WhiteHorse Finance has been 35,500 shares per day over the past 30 days. WhiteHorse Finance has a market cap of $143.8 million and is part of the financial services industry. Shares are down 16% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

WhiteHorse Finance

as a

hold

. The company's strengths can be seen in multiple areas, such as its robust revenue growth 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 came in higher than the industry average of 0.3%. Since the same quarter one year prior, revenues rose by 26.4%. 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 WHITEHORSE FINANCE INC is rather high; currently it is at 62.49%. 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 12.19% trails the industry average.
  • WHITEHORSE FINANCE INC 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 reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, WHITEHORSE FINANCE INC increased its bottom line by earning $1.32 versus $1.26 in the prior year. This year, the market expects an improvement in earnings ($1.48 versus $1.32).
  • The share price of WHITEHORSE FINANCE INC has not done very well: it is down 17.40% 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 68.7% when compared to the same quarter one year ago, falling from $4.56 million to $1.43 million.

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Evolving Systems

Dividend Yield: 8.30%

Evolving Systems

(NASDAQ:

EVOL

) shares currently have a dividend yield of 8.30%.

Evolving Systems, Inc. provides software solutions and services to the wireless, wireline, and cable markets in the United Kingdom, Nigeria, Mexico, and internationally. The company has a P/E ratio of 16.06.

The average volume for Evolving Systems has been 39,800 shares per day over the past 30 days. Evolving Systems has a market cap of $62.0 million and is part of the computer software & services industry. Shares are down 3.6% year-to-date as of the close of trading on Tuesday.

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TheStreet Recommends

TheStreet Ratings rates

Evolving Systems

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, 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 a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, EVOL has a quick ratio of 1.84, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has slightly increased to -$0.24 million or 5.42% when compared to the same quarter last year. Despite an increase in cash flow, EVOLVING SYSTEMS INC's cash flow growth rate is still lower than the industry average growth rate of 26.07%.
  • 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 Software industry. The net income has significantly decreased by 66.0% when compared to the same quarter one year ago, falling from $1.68 million to $0.57 million.
  • 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 Software industry and the overall market, EVOLVING SYSTEMS INC's return on equity is below that of both the industry average and the S&P 500.

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Garrison Capital

Dividend Yield: 12.00%

Garrison Capital

(NASDAQ:

GARS

) shares currently have a dividend yield of 12.00%.

Garrison Capital Inc. is a business development company specializing in investments primarily in the debt and equity of middle market companies. The company has a P/E ratio of 16.04.

The average volume for Garrison Capital has been 52,000 shares per day over the past 30 days. Garrison Capital has a market cap of $196.2 million and is part of the financial services industry. Shares are down 5.3% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Garrison Capital

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, 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:

  • GARS's revenue growth has slightly outpaced the industry average of 0.3%. Since the same quarter one year prior, revenues slightly increased by 2.0%. 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.
  • Net operating cash flow has significantly increased by 211.88% to $39.18 million when compared to the same quarter last year. In addition, GARRISON CAPITAL INC has also vastly surpassed the industry average cash flow growth rate of -52.93%.
  • The gross profit margin for GARRISON CAPITAL INC is currently very high, coming in at 76.63%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.82% is in-line with 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. When compared to other companies in the Capital Markets industry and the overall market, GARRISON CAPITAL INC's return on equity is below that of both the industry average and the S&P 500.
  • The share price of GARRISON CAPITAL INC has not done very well: it is down 16.70% 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. 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.

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