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.

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The following pages contain our analysis of 3 stocks with substantial yields, that ultimately, we have rated "Hold."

Alcentra Capital

Dividend Yield: 11.20%

Alcentra Capital

(NASDAQ:

ABDC

) shares currently have a dividend yield of 11.20%.

Alcentra Capital Corporation is a business development company specializing in investments in lower middle-market companies. The company has a P/E ratio of 8.32.

The average volume for Alcentra Capital has been 36,900 shares per day over the past 30 days. Alcentra Capital has a market cap of $164.1 million and is part of the financial services industry. Shares are up 4.3% year-to-date as of the close of trading on Friday.

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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, expanding profit margins and good cash flow from operations. 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 feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 24.3%. Since the same quarter one year prior, revenues rose by 20.9%. 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 ALCENTRA CAPITAL CORP is currently very high, coming in at 72.17%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 43.37% significantly outperformed against the industry average.
  • In its most recent trading session, ABDC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
  • 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 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.

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Redwood

Dividend Yield: 7.80%

Redwood

(NYSE:

RWT

) shares currently have a dividend yield of 7.80%.

Redwood Trust, Inc., together with its subsidiaries, focuses on investing in mortgage- and other real estate-related assets; and engaging in residential and commercial mortgage banking activities in the United States. The company has a P/E ratio of 12.22.

The average volume for Redwood has been 382,600 shares per day over the past 30 days. Redwood has a market cap of $1.1 billion and is part of the real estate industry. Shares are up 8.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Redwood

as a

hold

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

Highlights from the ratings report include:

  • Net operating cash flow has significantly increased by 188.99% to $105.98 million when compared to the same quarter last year. In addition, REDWOOD TRUST INC has also vastly surpassed the industry average cash flow growth rate of 11.78%.
  • REDWOOD TRUST INC's earnings per share declined by 6.3% 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, REDWOOD TRUST INC increased its bottom line by earning $1.15 versus $1.13 in the prior year. This year, the market expects an improvement in earnings ($1.34 versus $1.15).
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, RWT has underperformed the S&P 500 Index, declining 11.46% 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 significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has decreased by 18.5% when compared to the same quarter one year ago, dropping from $14.80 million to $12.06 million.

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Martin Midstream Partners

Dividend Yield: 13.40%

Martin Midstream Partners

(NASDAQ:

MMLP

) shares currently have a dividend yield of 13.40%.

Martin Midstream Partners L.P. collects, transports, stores, and markets petroleum products and by-products in the United States Gulf Coast region. The company has a P/E ratio of 39.80.

The average volume for Martin Midstream Partners has been 167,500 shares per day over the past 30 days. Martin Midstream Partners has a market cap of $860.8 million and is part of the energy industry. Shares are up 10.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Martin Midstream Partners

as a

hold

. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • 42.42% is the gross profit margin for MARTIN MIDSTREAM PARTNERS LP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 7.05% is above that of the industry average.
  • 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, MARTIN MIDSTREAM PARTNERS LP's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Net operating cash flow has declined marginally to $45.31 million or 3.07% when compared to the same quarter last year. Despite a decrease in cash flow MARTIN MIDSTREAM PARTNERS LP is still fairing well by exceeding its industry average cash flow growth rate of -49.64%.
  • The debt-to-equity ratio is very high at 2.32 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, MMLP maintains a poor quick ratio of 0.80, which illustrates the inability to avoid short-term cash problems.

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