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.

TST Recommends

The following pages contain our analysis of 3 stocks with substantial yields, that ultimately, we have rated "Hold." Arlington Asset InvestmentDividend Yield: 20.00%Arlington Asset Investment (NYSE: AI) shares currently have a dividend yield of 20.00%. Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The company has a P/E ratio of 4.15. The average volume for Arlington Asset Investment has been 251,900 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $287.9 million and is part of the real estate industry. Shares are down 6.2% year-to-date as of the close of trading on Wednesday. EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE. TheStreet Ratings rates Arlington Asset Investment as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins 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:

  • AI's very impressive revenue growth greatly exceeded the industry average of 23.1%. Since the same quarter one year prior, revenues leaped by 1148.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for ARLINGTON ASSET INVESTMENT is currently very high, coming in at 88.43%. It has increased significantly from the same period last year. Along with this, the net profit margin of 57.54% significantly outperformed against the industry average.
  • ARLINGTON ASSET INVESTMENT 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, ARLINGTON ASSET INVESTMENT swung to a loss, reporting -$3.02 versus $0.61 in the prior year. This year, the market expects an improvement in earnings ($3.58 versus -$3.02).
  • AI'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 41.75%, 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • 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, ARLINGTON ASSET INVESTMENT's return on equity significantly trails that of both the industry average and the S&P 500.

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Solar Capital

Dividend Yield: 9.10%

Solar Capital

(NASDAQ:

SLRC

) shares currently have a dividend yield of 9.10%. Solar Capital Ltd. is a business development company specializing in investments in leveraged middle market companies. The company has a P/E ratio of 22.29. The average volume for Solar Capital has been 123,700 shares per day over the past 30 days. Solar Capital has a market cap of $744.0 million and is part of the financial services industry. Shares are up 10.6% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Solar Capital

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 gross profit margin for SOLAR CAPITAL LTD is rather high; currently it is at 68.17%. 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 -45.00% is in-line with the industry average.
  • Despite the weak revenue results, SLRC has outperformed against the industry average of 23.1%. Since the same quarter one year prior, revenues slightly dropped by 4.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • SOLAR CAPITAL LTD 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, SOLAR CAPITAL LTD reported lower earnings of $0.34 versus $1.12 in the prior year. This year, the market expects an improvement in earnings ($1.64 versus $0.34).
  • Net operating cash flow has significantly decreased to -$265.88 million or 379.62% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The share price of SOLAR CAPITAL LTD has not done very well: it is down 11.93% 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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JMP Group

Dividend Yield: 7.10%

JMP Group

(NYSE:

JMP

) shares currently have a dividend yield of 7.10%. JMP Group LLC, together with its subsidiaries, provides investment banking and asset management services in the United States. It operates through Broker-Dealer, Asset Management, and Corporate Credit Management segments. The company has a P/E ratio of 31.50. The average volume for JMP Group has been 42,800 shares per day over the past 30 days. JMP Group has a market cap of $106.9 million and is part of the financial services industry. Shares are down 8.1% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

JMP Group

as a

hold

. The company's strengths can be seen in multiple areas, such as its increase in net income and growth in earnings per share. 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 poor profit margins. 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 195.3% when compared to the same quarter one year prior, rising from -$1.89 million to $1.80 million.
  • JMP GROUP LLC 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, JMP GROUP LLC swung to a loss, reporting -$0.03 versus $0.56 in the prior year. This year, the market expects an improvement in earnings ($0.52 versus -$0.03).
  • Despite the weak revenue results, JMP has outperformed against the industry average of 23.1%. Since the same quarter one year prior, revenues slightly dropped by 2.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for JMP GROUP LLC is rather low; currently it is at 24.57%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.82% significantly trails the industry average.
  • JMP'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 34.01%, 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. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, JMP is still more expensive than most of the other companies in its industry.

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