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: 12.40%

PennyMac Mortgage Investment

(NYSE:

PMT

) shares currently have a dividend yield of 12.40%.

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 916,400 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 28.6% year-to-date as of the close of trading on Wednesday.

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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 9.8%. 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.
  • 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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Two Harbors Investment

Dividend Yield: 11.50%

Two Harbors Investment

(NYSE:

TWO

) shares currently have a dividend yield of 11.50%.

Two Harbors Investment Corp. The company has a P/E ratio of 7.02.

The average volume for Two Harbors Investment has been 2,529,400 shares per day over the past 30 days. Two Harbors Investment has a market cap of $3.3 billion and is part of the real estate industry. Shares are down 10.8% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Two Harbors Investment

as a

hold

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow 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 9.8%. Since the same quarter one year prior, revenues rose by 26.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • TWO HARBORS INVESTMENT CORP 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, TWO HARBORS INVESTMENT CORP reported lower earnings of $0.46 versus $1.66 in the prior year. This year, the market expects an improvement in earnings ($0.95 versus $0.46).
  • TWO has underperformed the S&P 500 Index, declining 7.79% 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.
  • Net operating cash flow has significantly decreased to -$526.50 million or 159.28% 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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Blackstone Mortgage

Dividend Yield: 8.70%

Blackstone Mortgage

(NYSE:

BXMT

) shares currently have a dividend yield of 8.70%.

Blackstone Mortgage Trust, Inc., a real estate finance company, originates and purchases senior loans collateralized by properties in North America and Europe. It operates through two segments, Loan Origination and CT Legacy Portfolio. The company has a P/E ratio of 16.76.

The average volume for Blackstone Mortgage has been 682,300 shares per day over the past 30 days. Blackstone Mortgage has a market cap of $2.7 billion and is part of the real estate industry. Shares are down 2.2% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Blackstone Mortgage

as a

hold

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 9.8%. Since the same quarter one year prior, revenues rose by 23.1%. 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 BLACKSTONE MORTGAGE TR INC is currently very high, coming in at 71.11%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 35.63% is above that of the industry average.
  • After a year of stock price fluctuations, the net result is that BXMT's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. 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 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, BLACKSTONE MORTGAGE TR INC's return on equity is below that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$26.06 million or 237.37% 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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