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."

Harvest Capital Credit

Dividend Yield: 12.90%

Harvest Capital Credit

(NASDAQ:

HCAP

) shares currently have a dividend yield of 12.90%.

Harvest Capital Credit LLC is a business development company providing structured credit to small businesses. The company has a P/E ratio of 6.81.

The average volume for Harvest Capital Credit has been 23,500 shares per day over the past 30 days. Harvest Capital Credit has a market cap of $65.7 million and is part of the financial services industry. Shares are down 12% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Harvest Capital Credit

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 deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 4.5%. Since the same quarter one year prior, revenues rose by 26.9%. 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 HARVEST CAPITAL CREDIT CORP is rather high; currently it is at 62.61%. Regardless of HCAP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HCAP's net profit margin of 16.91% compares favorably to the industry average.
  • HARVEST CAPITAL CREDIT 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, HARVEST CAPITAL CREDIT CORP increased its bottom line by earning $1.52 versus $0.47 in the prior year. For the next year, the market is expecting a contraction of 11.8% in earnings ($1.34 versus $1.52).
  • 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 Capital Markets industry. The net income has significantly decreased by 58.3% when compared to the same quarter one year ago, falling from $2.02 million to $0.84 million.
  • 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. When compared to other companies in the Capital Markets industry and the overall market, HARVEST CAPITAL CREDIT CORP's return on equity is below that of both the industry average and the S&P 500.

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Alcentra Capital

Dividend Yield: 13.40%

Alcentra Capital

(NASDAQ:

ABDC

) shares currently have a dividend yield of 13.40%.

Alcentra Capital Corporation is a business development company specializing in investments in lower middle-market companies. The company has a P/E ratio of 6.95.

The average volume for Alcentra Capital has been 41,200 shares per day over the past 30 days. Alcentra Capital has a market cap of $137.1 million and is part of the financial services industry. Shares are down 12.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Alcentra Capital

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 greatly exceeded the industry average of 4.5%. Since the same quarter one year prior, revenues rose by 45.1%. 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.
  • The gross profit margin for ALCENTRA CAPITAL CORP is currently very high, coming in at 77.23%. It has increased significantly from the same period last year. Along with this, the net profit margin of 38.25% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 77.69% to -$1.59 million when compared to the same quarter last year. Despite an increase in cash flow of 77.69%, ALCENTRA CAPITAL CORP is still growing at a significantly lower rate than the industry average of 142.81%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 26.26%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 58.62% 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 when compared to that of the S&P 500 and the Capital Markets industry. The net income has significantly decreased by 58.8% when compared to the same quarter one year ago, falling from $7.90 million to $3.25 million.

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Medley Capital

Dividend Yield: 19.90%

Medley Capital

(NYSE:

MCC

) shares currently have a dividend yield of 19.90%.

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 average volume for Medley Capital has been 501,600 shares per day over the past 30 days. Medley Capital has a market cap of $336.7 million and is part of the financial services industry. Shares are down 16.5% year-to-date as of the close of trading on Friday.

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

Highlights from the ratings report include:

  • Net operating cash flow has significantly increased by 246.80% to $62.18 million when compared to the same quarter last year. In addition, MEDLEY CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of 142.81%.
  • The gross profit margin for MEDLEY CAPITAL CORP is rather high; currently it is at 65.75%. 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 -113.87% significantly underperformed when compared to the industry average.
  • 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 114.0% when compared to the same quarter one year ago, falling from -$18.32 million to -$39.20 million.
  • 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, MEDLEY CAPITAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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