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."

Capitala Finance

Dividend Yield: 13.40%

Capitala Finance

(NASDAQ:

CPTA

) shares currently have a dividend yield of 13.40%.

Capitala Finance Corp. is a Business Development Company specializing in investments in traditional mezzanine, senior subordinated and unitranche debt, second-lien loans, equity securities issued by lower and traditional middle-market companies, and small and middle-market companies. The company has a P/E ratio of 77.94.

The average volume for Capitala Finance has been 78,800 shares per day over the past 30 days. Capitala Finance has a market cap of $226.5 million and is part of the financial services industry. Shares are down 19.5% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

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

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 20.4%. 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 CAPITALA FINANCE CORP is rather high; currently it is at 66.28%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 32.76% significantly outperformed against the industry average.
  • CAPITALA FINANCE CORP's earnings per share declined by 35.4% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CAPITALA FINANCE CORP swung to a loss, reporting -$0.27 versus $1.13 in the prior year. This year, the market expects an improvement in earnings ($1.57 versus -$0.27).
  • Net operating cash flow has significantly decreased to -$25.26 million or 535.71% 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 CAPITALA FINANCE CORP has not done very well: it is down 18.35% 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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Capital Product Partners

Dividend Yield: 14.10%

Capital Product Partners

(NASDAQ:

CPLP

) shares currently have a dividend yield of 14.10%.

Capital Product Partners L.P., a shipping company, provides marine transportation services in Greece. The company has a P/E ratio of 20.91.

The average volume for Capital Product Partners has been 378,800 shares per day over the past 30 days. Capital Product Partners has a market cap of $799.9 million and is part of the transportation industry. Shares are down 14.6% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Capital Product Partners

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. 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:

  • The revenue growth greatly exceeded the industry average of 34.5%. Since the same quarter one year prior, revenues rose by 14.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, CPLP has a quick ratio of 2.30, which demonstrates the ability of the company to cover short-term liquidity needs.
  • CAPITAL PRODUCT PARTNERS LP 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, CAPITAL PRODUCT PARTNERS LP reported lower earnings of $0.31 versus $0.99 in the prior year. This year, the market expects an improvement in earnings ($0.44 versus $0.31).
  • CPLP has underperformed the S&P 500 Index, declining 13.18% from its price level of one year ago. 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.
  • 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CAPITAL PRODUCT PARTNERS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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Arbor Realty

Dividend Yield: 9.40%

Arbor Realty

(NYSE:

ABR

) shares currently have a dividend yield of 9.40%.

Arbor Realty Trust, Inc., a specialized real estate finance company, invests in various structured finance investments. The company has a P/E ratio of 3.46.

The average volume for Arbor Realty has been 106,400 shares per day over the past 30 days. Arbor Realty has a market cap of $326.2 million and is part of the real estate industry. Shares are down 5.3% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Arbor Realty

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in 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:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.8%. Since the same quarter one year prior, revenues slightly increased by 1.3%. 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 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ARBOR REALTY TRUST INC's return on equity exceeds that of both the industry average and the S&P 500.
  • In its most recent trading session, ABR 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.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income has decreased by 7.2% when compared to the same quarter one year ago, dropping from $13.36 million to $12.39 million.

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