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: 15.20%

PennyMac Mortgage Investment

(NYSE:

PMT

) shares currently have a dividend yield of 15.20%.

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 7.78.

The average volume for PennyMac Mortgage Investment has been 824,300 shares per day over the past 30 days. PennyMac Mortgage Investment has a market cap of $1.2 billion and is part of the real estate industry. Shares are down 24.5% year-to-date as of the close of trading on Tuesday.

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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 55.10%. Despite the high profit margin, it has decreased significantly 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 9.8%. 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.
  • 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 62.7% when compared to the same quarter one year ago, falling from $75.21 million to $28.07 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. 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.

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Select Income REIT

Dividend Yield: 10.10%

Select Income REIT

(NYSE:

SIR

) shares currently have a dividend yield of 10.10%.

Select Income REIT, a real estate investment trust (REIT), primarily owns and invests in single tenant and net leased properties. The company has a P/E ratio of 16.29.

The average volume for Select Income REIT has been 707,000 shares per day over the past 30 days. Select Income REIT has a market cap of $1.8 billion and is part of the real estate industry. Shares are down 19.3% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Select Income REIT

as a

hold

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels and good cash flow from operations. 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:

  • SIR's very impressive revenue growth greatly exceeded the industry average of 9.8%. Since the same quarter one year prior, revenues leaped by 89.2%. 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.
  • 45.58% is the gross profit margin for SELECT INCOME REIT which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 27.17% trails the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income has decreased by 3.5% when compared to the same quarter one year ago, dropping from $30.21 million to $29.14 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 Real Estate Investment Trusts (REITs) industry and the overall market, SELECT INCOME REIT's return on equity is below that of both the industry average and the S&P 500.

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Piedmont Office Realty

Dividend Yield: 4.60%

Piedmont Office Realty

(NYSE:

PDM

) shares currently have a dividend yield of 4.60%.

Piedmont Office Realty Trust, Inc. engages in the acquisition and ownership of commercial real estate properties in the United States. Its property portfolio primarily consists of office and industrial buildings, warehouses, and manufacturing facilities. The company has a P/E ratio of 40.07.

The average volume for Piedmont Office Realty has been 1,368,400 shares per day over the past 30 days. Piedmont Office Realty has a market cap of $2.8 billion and is part of the real estate industry. Shares are down 2.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Piedmont Office Realty

as a

hold

. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 144.1% when compared to the same quarter one year prior, rising from $12.28 million to $29.98 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.8%. Since the same quarter one year prior, revenues slightly increased by 6.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • PIEDMONT OFFICE REALTY TRUST reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PIEDMONT OFFICE REALTY TRUST reported lower earnings of $0.27 versus $0.43 in the prior year. This year, the market expects an improvement in earnings ($0.32 versus $0.27).
  • PDM has underperformed the S&P 500 Index, declining 7.04% from its price level of one year ago. 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 gross profit margin for PIEDMONT OFFICE REALTY TRUST is currently extremely low, coming in at 14.61%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 20.32% significantly trails the industry average.

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