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: 9.10%

FS Investment

(NYSE:

FSIC

) shares currently have a dividend yield of 9.10%.

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 9.56.

The average volume for FS Investment has been 797,700 shares per day over the past 30 days. FS Investment has a market cap of $2.4 billion and is part of the financial services industry. Shares are down 2.1% year-to-date as of the close of trading on Monday.

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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 robust revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and a generally disappointing performance in the stock itself.

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 22.4%. 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 FS INVESTMENT CORP is currently very high, coming in at 76.20%. It has increased significantly from the same period last year. Along with this, the net profit margin of 35.00% significantly outperformed against the industry average.
  • When compared to other companies in the Capital Markets industry and the overall market, FS INVESTMENT CORP's return on equity is below that of both the industry average and the S&P 500.
  • In its most recent trading session, FSIC 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 underperformed when compared to that of the S&P 500 and the Capital Markets industry average. The net income has significantly decreased by 25.4% when compared to the same quarter one year ago, falling from $69.31 million to $51.71 million.

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New York Mortgage

Dividend Yield: 16.90%

New York Mortgage

(NASDAQ:

NYMT

) shares currently have a dividend yield of 16.90%.

New York Mortgage Trust, Inc., a real estate investment trust (REIT), engages in acquiring, investing in, financing, and managing mortgage-related and financial assets in the United States. The company has a P/E ratio of 4.51.

The average volume for New York Mortgage has been 1,469,600 shares per day over the past 30 days. New York Mortgage has a market cap of $621.4 million and is part of the real estate industry. Shares are down 25.9% year-to-date as of the close of trading on Monday.

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TheStreet Recommends

TheStreet Ratings rates

New York Mortgage

as a

hold

. The company's strengths can be seen in multiple areas, such as its notable return on equity, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, NEW YORK MORTGAGE TRUST INC's return on equity exceeds that of both the industry average and the S&P 500.
  • NYMT, with its decline in revenue, underperformed when compared the industry average of 9.8%. Since the same quarter one year prior, revenues fell by 14.3%. 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 underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income has decreased by 22.5% when compared to the same quarter one year ago, dropping from $31.78 million to $24.63 million.
  • The gross profit margin for NEW YORK MORTGAGE TRUST INC is currently lower than what is desirable, coming in at 29.53%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 24.86% trails that of the industry average.

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TPG Specialty Lending

Dividend Yield: 8.90%

TPG Specialty Lending

(NYSE:

TSLX

) shares currently have a dividend yield of 8.90%.

TPG Specialty Lending, Inc. is a business development company. The company has a P/E ratio of 9.94.

The average volume for TPG Specialty Lending has been 101,400 shares per day over the past 30 days. TPG Specialty Lending has a market cap of $950.3 million and is part of the real estate industry. Shares are up 4.9% year-to-date as of the close of trading on Monday.

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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 solid stock price performance, compelling growth in net income and notable return on equity. 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 stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
  • 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.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.0%. Since the same quarter one year prior, revenues slightly dropped by 0.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 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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