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."

NVE

Dividend Yield: 8.40%

NVE

(NASDAQ:

NVEC

) shares currently have a dividend yield of 8.40%.

NVE Corporation develops and sells devices using spintronics, a nanotechnology that utilizes electron spin rather than electron charge to acquire, store, and transmit information. The company has a P/E ratio of 16.33.

The average volume for NVE has been 16,900 shares per day over the past 30 days. NVE has a market cap of $231.1 million and is part of the electronics industry. Shares are down 13.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

NVE

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, 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, unimpressive growth in net income and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • NVEC 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. Along with this, the company maintains a quick ratio of 18.40, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has slightly increased to $4.06 million or 5.45% when compared to the same quarter last year. In addition, NVE CORP has also vastly surpassed the industry average cash flow growth rate of -74.69%.
  • 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 Semiconductors & Semiconductor Equipment industry and the overall market on the basis of return on equity, NVE CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Semiconductors & Semiconductor Equipment industry average. The net income has decreased by 7.7% when compared to the same quarter one year ago, dropping from $2.79 million to $2.58 million.
  • Looking at the price performance of NVEC's shares over the past 12 months, there is not much good news to report: the stock is down 27.56%, 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.

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THL Credit

Dividend Yield: 15.30%

THL Credit

(NASDAQ:

TCRD

) shares currently have a dividend yield of 15.30%.

THL Credit, Inc. is a business development company specializing in direct and fund of fund investments. The fund seeks to invest in debt and equity securities of middle market companies. The company has a P/E ratio of 7.06.

The average volume for THL Credit has been 122,500 shares per day over the past 30 days. THL Credit has a market cap of $296.4 million and is part of the financial services industry. Shares are down 16.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

THL Credit

as a

hold

. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:

  • The gross profit margin for THL CREDIT INC is rather high; currently it is at 65.45%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 11.22% trails the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 4.2%. Since the same quarter one year prior, revenues slightly dropped by 0.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • THL CREDIT INC 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, THL CREDIT INC reported lower earnings of $1.07 versus $1.45 in the prior year. This year, the market expects an improvement in earnings ($1.40 versus $1.07).
  • The share price of THL CREDIT INC has not done very well: it is down 23.68% 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. 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 when compared to that of the S&P 500 and the Capital Markets industry. The net income has significantly decreased by 78.0% when compared to the same quarter one year ago, falling from $11.81 million to $2.59 million.

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Gladstone Investment

Dividend Yield: 11.50%

Gladstone Investment

(NASDAQ:

GAIN

) shares currently have a dividend yield of 11.50%.

Gladstone Investment Corporation is a business development company specializing in buyouts; recapitalizations; refinancing existing debt; senior debt securities; junior subordinated debt securities; limited liability company interests, and warrants or options. The company has a P/E ratio of 46.71.

The average volume for Gladstone Investment has been 172,800 shares per day over the past 30 days. Gladstone Investment has a market cap of $198.0 million and is part of the financial services industry. Shares are down 14.9% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Gladstone Investment

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and notable return on equity. 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:

  • GAIN's revenue growth has slightly outpaced the industry average of 4.2%. Since the same quarter one year prior, revenues slightly increased by 4.4%. 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.
  • Net operating cash flow has significantly increased by 150.09% to $19.93 million when compared to the same quarter last year. In addition, GLADSTONE INVESTMENT CORP/DE has also vastly surpassed the industry average cash flow growth rate of -98.63%.
  • 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 Capital Markets industry and the overall market on the basis of return on equity, GLADSTONE INVESTMENT CORP/DE has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The share price of GLADSTONE INVESTMENT CORP/DE is down 15.45% when compared to where it was trading one year earlier. This reflects both (a) the trend in the overall market as well as (b) the sharp decline in the company's earnings per share. 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 when compared to that of the S&P 500 and the Capital Markets industry. The net income has significantly decreased by 181.9% when compared to the same quarter one year ago, falling from $7.59 million to -$6.21 million.

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