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."

Fifth Street Finance Corporation

Dividend Yield: 11.10%

Fifth Street Finance Corporation

(NASDAQ:

FSC

) shares currently have a dividend yield of 11.10%.

Fifth Street Finance Corp. The company has a P/E ratio of 8.06.

The average volume for Fifth Street Finance Corporation has been 946,700 shares per day over the past 30 days. Fifth Street Finance Corporation has a market cap of $993.6 million and is part of the financial services industry. Shares are down 18.4% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Fifth Street Finance Corporation

as a

hold

. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and attractive valuation levels. 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 deteriorating net income.

Highlights from the ratings report include:

  • Net operating cash flow has significantly increased by 161.67% to $173.18 million when compared to the same quarter last year. In addition, FIFTH STREET FINANCE CORP has also vastly surpassed the industry average cash flow growth rate of -430.45%.
  • The gross profit margin for FIFTH STREET FINANCE CORP is rather high; currently it is at 64.98%. 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 37.27% significantly outperformed against the industry.
  • 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, FIFTH STREET FINANCE CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Looking at the price performance of FSC's shares over the past 12 months, there is not much good news to report: the stock is down 33.17%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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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Holly Energy Partners

Dividend Yield: 7.40%

Holly Energy Partners

(NYSE:

HEP

) shares currently have a dividend yield of 7.40%.

Holly Energy Partners, L.P. owns and operates petroleum product and crude pipelines, storage tanks, distribution terminals, and loading rack facilities. The company has a P/E ratio of 21.04.

The average volume for Holly Energy Partners has been 127,700 shares per day over the past 30 days. Holly Energy Partners has a market cap of $1.7 billion and is part of the energy industry. Shares are down 1.7% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Holly Energy Partners

as a

hold

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

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 11.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • HOLLY ENERGY PARTNERS LP has improved earnings per share by 36.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HOLLY ENERGY PARTNERS LP increased its bottom line by earning $1.20 versus $0.88 in the prior year. This year, the market expects an improvement in earnings ($1.53 versus $1.20).
  • HEP has underperformed the S&P 500 Index, declining 14.85% 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 debt-to-equity ratio is very high at 2.99 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, HEP's quick ratio is somewhat strong at 1.20, demonstrating the ability to handle short-term liquidity needs.

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North European Oil Royalty

Dividend Yield: 14.70%

North European Oil Royalty

(NYSE:

NRT

) shares currently have a dividend yield of 14.70%.

North European Oil Royalty Trust, a grantor trust, holds overriding royalty rights covering gas and oil production in concessions or leases in the Federal Republic of Germany. It holds these rights under contracts with German exploration and development subsidiaries of ExxonMobil Corp. The company has a P/E ratio of 6.32.

The average volume for North European Oil Royalty has been 21,600 shares per day over the past 30 days. North European Oil Royalty has a market cap of $89.9 million and is part of the financial services industry. Shares are down 20.6% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

North European Oil Royalty

as a

hold

. At the same time, however, we also find weaknesses including feeble growth in the company's earnings per share and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • Despite the weak revenue results, NRT has outperformed against the industry average of 34.5%. Since the same quarter one year prior, revenues fell by 22.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 22.8% when compared to the same quarter one year ago, dropping from $4.29 million to $3.31 million.
  • Looking at the price performance of NRT's shares over the past 12 months, there is not much good news to report: the stock is down 55.42%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.
  • NORTH EUROPEAN OIL RTY TR's earnings per share declined by 23.4% 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 two years. During the past fiscal year, NORTH EUROPEAN OIL RTY TR reported lower earnings of $1.97 versus $2.26 in the prior year.

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