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."

Solar Capital

Dividend Yield: 9.60%

Solar Capital

(NASDAQ:

SLRC

) shares currently have a dividend yield of 9.60%.

Solar Capital Ltd. is a business development company specializing in investments in leveraged middle market companies. The company has a P/E ratio of 21.08.

The average volume for Solar Capital has been 202,500 shares per day over the past 30 days. Solar Capital has a market cap of $707.0 million and is part of the financial services industry. Shares are down 8.6% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Solar Capital

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 5.8%. Since the same quarter one year prior, revenues slightly increased by 7.3%. 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 SOLAR CAPITAL LTD is rather high; currently it is at 68.53%. Regardless of SLRC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SLRC's net profit margin of 0.28% is significantly lower than the industry average.
  • SOLAR CAPITAL LTD 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, SOLAR CAPITAL LTD reported lower earnings of $1.12 versus $1.70 in the prior year. This year, the market expects an improvement in earnings ($1.52 versus $1.12).
  • Net operating cash flow has declined marginally to -$127.54 million or 2.75% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The share price of SOLAR CAPITAL LTD has not done very well: it is down 6.58% 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. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

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Capital Product Partners

Dividend Yield: 18.70%

Capital Product Partners

(NASDAQ:

CPLP

) shares currently have a dividend yield of 18.70%.

Capital Product Partners L.P., a shipping company, provides marine transportation services in Greece. The company has a P/E ratio of 13.76.

The average volume for Capital Product Partners has been 438,800 shares per day over the past 30 days. Capital Product Partners has a market cap of $608.6 million and is part of the transportation industry. Shares are down 35.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Capital Product Partners

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 36.9%. Since the same quarter one year prior, revenues rose by 19.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 22.4% when compared to the same quarter one year prior, going from $11.27 million to $13.79 million.
  • CPLP's debt-to-equity ratio of 0.60 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that CPLP's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.55 is high and demonstrates strong liquidity.
  • 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CAPITAL PRODUCT PARTNERS LP's return on equity is below that of both the industry average and the S&P 500.
  • CPLP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 34.21%, which is also worse than the performance of the S&P 500 Index. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

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PennantPark Floating Rate Capital

Dividend Yield: 10.40%

PennantPark Floating Rate Capital

(NASDAQ:

PFLT

) shares currently have a dividend yield of 10.40%.

PennantPark Floating Rate Capital Ltd. is a business development company. It seeks to make secondary direct, debt, equity, and loan investments. The fund seeks to invest through floating rate loans in private or thinly traded or small market-cap, public middle market companies. The company has a P/E ratio of 7.91.

The average volume for PennantPark Floating Rate Capital has been 136,500 shares per day over the past 30 days. PennantPark Floating Rate Capital has a market cap of $291.9 million and is part of the financial services industry. Shares are down 18.3% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

PennantPark Floating Rate Capital

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 PENNANTPARK FLOATING RT CAP is currently very high, coming in at 84.49%. 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 15.59% trails the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.8%. Since the same quarter one year prior, revenues slightly dropped by 5.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • PENNANTPARK FLOATING RT CAP 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, PENNANTPARK FLOATING RT CAP reported lower earnings of $0.82 versus $1.38 in the prior year. This year, the market expects an improvement in earnings ($1.02 versus $0.82).
  • 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 46.7% when compared to the same quarter one year ago, falling from $2.28 million to $1.22 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 Capital Markets industry and the overall market, PENNANTPARK FLOATING RT CAP's return on equity is below that of both the industry average and the S&P 500.

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