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."

PennyMac Mortgage Investment

Dividend Yield: 16.10%

PennyMac Mortgage Investment

(NYSE:

PMT

) shares currently have a dividend yield of 16.10%.

PennyMac Mortgage Investment Trust, a specialty finance company, invests primarily in residential mortgage loans and mortgage-related assets in the United States. The company operates through two segments, Correspondent Production and Investment Activities. The company has a P/E ratio of 7.34.

The average volume for PennyMac Mortgage Investment has been 880,200 shares per day over the past 30 days. PennyMac Mortgage Investment has a market cap of $1.1 billion and is part of the real estate industry. Shares are down 26% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

PennyMac Mortgage Investment

as a

hold

. The company's strengths can be seen in multiple areas, such as its attractive valuation levels and expanding profit margins. 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 disappointing return on equity.

Highlights from the ratings report include:

  • The gross profit margin for PENNYMAC MORTGAGE INVEST TR is rather high; currently it is at 65.14%. Regardless of PMT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 28.21% trails the industry average.
  • The revenue fell significantly faster than the industry average of 9.7%. Since the same quarter one year prior, revenues fell by 30.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, PENNYMAC MORTGAGE INVEST TR's return on equity is below that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to -$907.28 million or 32.68% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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H&E Equipment Services

Dividend Yield: 5.50%

H&E Equipment Services

(NASDAQ:

HEES

) shares currently have a dividend yield of 5.50%.

H&E Equipment Services, Inc. operates as an integrated equipment services company. The company rents, sells, and provides parts and service support for hi-lift or aerial work platform equipment, crane, earthmoving equipment, and industrial lift truck categories. The company has a P/E ratio of 14.36.

The average volume for H&E Equipment Services has been 515,000 shares per day over the past 30 days. H&E Equipment Services has a market cap of $709.0 million and is part of the diversified services industry. Shares are down 29.2% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

H&E Equipment Services

as a

hold

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

Highlights from the ratings report include:

  • 48.26% is the gross profit margin for H&E EQUIPMENT SERVICES INC which we consider to be strong. 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 4.37% trails the industry average.
  • Net operating cash flow has slightly increased to $55.08 million or 6.50% when compared to the same quarter last year. Despite an increase in cash flow, H&E EQUIPMENT SERVICES INC's cash flow growth rate is still lower than the industry average growth rate of 30.84%.
  • HEES, with its decline in revenue, slightly underperformed the industry average of 2.9%. Since the same quarter one year prior, revenues slightly dropped by 6.4%. 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 Trading Companies & Distributors industry average. The net income has significantly decreased by 27.0% when compared to the same quarter one year ago, falling from $15.73 million to $11.48 million.
  • The debt-to-equity ratio is very high at 7.13 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.

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Lexmark International

Dividend Yield: 4.90%

Lexmark International

(NYSE:

LXK

) shares currently have a dividend yield of 4.90%.

Lexmark International, Inc., together with its subsidiaries, operates as a developer, manufacturer, and supplier of printing, imaging, device management, managed print services (MPS), document workflow, and business process and content management solutions worldwide.

The average volume for Lexmark International has been 938,500 shares per day over the past 30 days. Lexmark International has a market cap of $1.8 billion and is part of the computer hardware industry. Shares are down 29.8% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Lexmark International

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:

  • 48.89% is the gross profit margin for LEXMARK INTL INC which we consider to be strong. 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 -4.06% is in-line with the industry average.
  • The revenue fell significantly faster than the industry average of 36.9%. Since the same quarter one year prior, revenues slightly dropped by 0.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • LEXMARK INTL 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, LEXMARK INTL INC reported lower earnings of $1.23 versus $4.10 in the prior year. This year, the market expects an improvement in earnings ($3.56 versus $1.23).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Computers & Peripherals industry and the overall market, LEXMARK INTL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • 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 Computers & Peripherals industry. The net income has significantly decreased by 196.5% when compared to the same quarter one year ago, falling from $37.50 million to -$36.20 million.

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