Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer

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."

FS Investment

Dividend Yield: 8.70%

FS Investment

(NYSE:

FSIC

) shares currently have a dividend yield of 8.70%.

FS Investment Corporation is a business development company specializing in investments in debt securities. It seeks to purchase interests in loans through secondary market transactions or directly from the target companies as primary market investments. The company has a P/E ratio of 10.09.

The average volume for FS Investment has been 780,400 shares per day over the past 30 days. FS Investment has a market cap of $2.5 billion and is part of the financial services industry. Shares are up 2.5% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

FS Investment

as a

hold

. The company's strengths can be seen in multiple areas, such as its expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and weak operating cash flow.

Highlights from the ratings report include:

  • The gross profit margin for FS INVESTMENT CORP is rather high; currently it is at 63.47%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 64.82% significantly outperformed against the industry average.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, FSIC has underperformed the S&P 500 Index, declining 6.75% from its price level of one year ago.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Capital Markets industry average, but is greater than that of the S&P 500. The net income has decreased by 12.0% when compared to the same quarter one year ago, dropping from $80.06 million to $70.43 million.
  • Net operating cash flow has significantly decreased to $23.21 million or 74.64% 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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Medley Capital

Dividend Yield: 13.40%

Medley Capital

(NYSE:

MCC

) shares currently have a dividend yield of 13.40%.

Medley Capital Corporation is a business development company. The fund seeks to invest in privately negotiated debt and equity securities of small and middle market companies. The company has a P/E ratio of 8.16.

The average volume for Medley Capital has been 319,300 shares per day over the past 30 days. Medley Capital has a market cap of $520.0 million and is part of the financial services industry. Shares are down 1.6% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Medley Capital

as a

hold

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations 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 5.9%. Since the same quarter one year prior, revenues rose by 17.1%. 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.
  • Net operating cash flow has significantly increased by 119.53% to $25.12 million when compared to the same quarter last year. Despite an increase in cash flow of 119.53%, MEDLEY CAPITAL CORP is still growing at a significantly lower rate than the industry average of 188.71%.
  • The gross profit margin for MEDLEY CAPITAL CORP is rather high; currently it is at 65.26%. Regardless of MCC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MCC's net profit margin of 32.04% compares favorably to the industry average.
  • 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. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, MEDLEY CAPITAL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 31.23%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 28.57% compared to 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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Terra Nitrogen

Dividend Yield: 7.30%

Terra Nitrogen

(NYSE:

TNH

) shares currently have a dividend yield of 7.30%.

Terra Nitrogen Company, L.P. produces nitrogen fertilizer products in the United States. It primarily offers anhydrous ammonia and urea ammonium nitrate solutions for farmers to improve the yield and quality of their crops. Terra Nitrogen GP Inc. serves as the general partner of the company. The company has a P/E ratio of 10.47.

The average volume for Terra Nitrogen has been 22,600 shares per day over the past 30 days. Terra Nitrogen has a market cap of $2.1 billion and is part of the chemicals industry. Shares are up 8.9% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Terra Nitrogen

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 feeble growth in the company's earnings per share, deteriorating net income and weak operating cash flow.

Highlights from the ratings report include:

  • TNH 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. To add to this, TNH has a quick ratio of 1.61, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for TERRA NITROGEN CO -LP is rather high; currently it is at 55.53%. Regardless of TNH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TNH's net profit margin of 46.60% significantly outperformed against the industry.
  • TNH, with its decline in revenue, underperformed when compared the industry average of 13.2%. Since the same quarter one year prior, revenues fell by 28.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 Chemicals industry. The net income has significantly decreased by 42.7% when compared to the same quarter one year ago, falling from $102.90 million to $59.00 million.
  • Net operating cash flow has decreased to $70.90 million or 36.97% 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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