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."

BP Prudhoe Bay Royalty

Dividend Yield: 7.40%

BP Prudhoe Bay Royalty

(NYSE:

BPT

) shares currently have a dividend yield of 7.40%.

BP Prudhoe Bay Royalty Trust operates as a grantor trust in the United States. The company holds overriding royalty interest comprising a non-operational interest in minerals in the Prudhoe Bay oil field located on the North Slope of Alaska. The company has a P/E ratio of 14.98.

The average volume for BP Prudhoe Bay Royalty has been 203,500 shares per day over the past 30 days. BP Prudhoe Bay Royalty has a market cap of $811.1 million and is part of the energy industry. Shares are down 42.6% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

BP Prudhoe Bay Royalty

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, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • BPT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.67, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for BP PRUDHOE BAY ROYALTY TRUST is currently very high, coming in at 100.00%. BPT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, BPT's net profit margin of 97.65% significantly outperformed against the industry.
  • BPT, with its very weak revenue results, has greatly underperformed against the industry average of 34.1%. Since the same quarter one year prior, revenues plummeted by 66.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 50.39%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 66.77% 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.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 66.8% when compared to the same quarter one year ago, falling from $64.39 million to $21.38 million.

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TPG Specialty Lending

Dividend Yield: 9.20%

TPG Specialty Lending

(NYSE:

TSLX

) shares currently have a dividend yield of 9.20%.

TPG Specialty Lending, Inc. is a business development company. The company has a P/E ratio of 9.68.

The average volume for TPG Specialty Lending has been 101,500 shares per day over the past 30 days. TPG Specialty Lending has a market cap of $914.1 million and is part of the real estate industry. Shares are up 1.1% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

TPG Specialty Lending

as a

hold

. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, notable return on equity and expanding profit margins. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.

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 24.9% when compared to the same quarter one year prior, going from $27.29 million to $34.11 million.
  • Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, TPG SPECIALTY LENDING INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • After a year of stock price fluctuations, the net result is that TSLX's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • TPG SPECIALTY LENDING INC has improved earnings per share by 23.5% in the most recent quarter compared to the same quarter a year ago. For the next year, the market is expecting a contraction of 2.3% in earnings ($1.69 versus $1.73).
  • Net operating cash flow has significantly decreased to -$48.14 million or 160.93% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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Pennant Park Investment Corporation

Dividend Yield: 16.80%

Pennant Park Investment Corporation

(NASDAQ:

PNNT

) shares currently have a dividend yield of 16.80%.

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 4.12.

The average volume for Pennant Park Investment Corporation has been 460,500 shares per day over the past 30 days. Pennant Park Investment Corporation has a market cap of $495.3 million and is part of the financial services industry. Shares are down 28.8% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Pennant Park Investment Corporation

as a

hold

. The company's strengths can be seen in multiple areas, such as its 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 5.1%. Since the same quarter one year prior, revenues rose by 14.6%. 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 PENNANTPARK INVESTMENT CORP is rather high; currently it is at 67.10%. 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 12.14% trails the industry average.
  • PENNANTPARK INVESTMENT 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 company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PENNANTPARK INVESTMENT CORP increased its bottom line by earning $1.66 versus $1.39 in the prior year. For the next year, the market is expecting a contraction of 33.7% in earnings ($1.10 versus $1.66).
  • 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 84.5% when compared to the same quarter one year ago, falling from $31.95 million to $4.94 million.
  • 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 on the basis of return on equity, PENNANTPARK INVESTMENT CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.

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