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."

Alcentra Capital

Dividend Yield: 13.00%

Alcentra Capital

(NASDAQ:

ABDC

) shares currently have a dividend yield of 13.00%.

Alcentra Capital Corporation is a business development company specializing in investments in lower middle-market companies. The company has a P/E ratio of 7.14.

The average volume for Alcentra Capital has been 43,600 shares per day over the past 30 days. Alcentra Capital has a market cap of $141.0 million and is part of the financial services industry. Shares are down 12.1% year-to-date as of the close of trading on Thursday.

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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, notable return on equity and expanding profit margins. 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 0.3%. 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.
  • Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, ALCENTRA CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • ALCENTRA CAPITAL CORP 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 year, the market expects an improvement in earnings ($1.44 versus $1.35).
  • The share price of ALCENTRA CAPITAL CORP has not done very well: it is down 18.42% 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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Fifth Street Finance

Dividend Yield: 12.30%

Fifth Street Finance

(NASDAQ:

FSC

) shares currently have a dividend yield of 12.30%.

Fifth Street Finance Corp. The company has a P/E ratio of 7.34.

The average volume for Fifth Street Finance has been 1,340,900 shares per day over the past 30 days. Fifth Street Finance has a market cap of $882.0 million and is part of the financial services industry. Shares are down 10.1% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Fifth Street Finance

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 a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:

  • The revenue fell significantly faster than the industry average of 0.3%. Since the same quarter one year prior, revenues fell by 33.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for FIFTH STREET FINANCE CORP is rather high; currently it is at 61.91%. Regardless of FSC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FSC's net profit margin of 0.39% is significantly lower than the industry average.
  • FIFTH STREET FINANCE CORP 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, FIFTH STREET FINANCE CORP reported lower earnings of $0.10 versus $0.79 in the prior year. This year, the market expects an improvement in earnings ($0.75 versus $0.10).
  • Net operating cash flow has significantly decreased to -$105.35 million or 202.67% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 28.20%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 100.00% 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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Horizon Technology Finance

Dividend Yield: 14.00%

Horizon Technology Finance

(NASDAQ:

HRZN

) shares currently have a dividend yield of 14.00%.

Horizon Technology Finance Corporation, a specialty finance company, lends to and invests in development-stage companies in the United States. The company has a P/E ratio of 12.19.

The average volume for Horizon Technology Finance has been 82,700 shares per day over the past 30 days. Horizon Technology Finance has a market cap of $114.9 million and is part of the financial services industry. Shares are down 14.5% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Horizon Technology Finance

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, 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 4.1%. Since the same quarter one year prior, revenues slightly increased by 8.9%. 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 HORIZON TECHNOLOGY FINANCE is rather high; currently it is at 65.30%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 41.97% significantly outperformed against the industry average.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, HORIZON TECHNOLOGY FINANCE has outperformed in comparison with the industry average, but has underperformed when compared to that of 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 29.05%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 40.00% 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.
  • Net operating cash flow has significantly decreased to -$4.94 million or 115.52% 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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