Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer

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: 9.00%

Solar Capital

(NASDAQ:

SLRC

) shares currently have a dividend yield of 9.00%.

Solar Capital Ltd. is a business development company specializing in investments in leveraged middle market companies. The company has a P/E ratio of 16.45.

The average volume for Solar Capital has been 179,400 shares per day over the past 30 days. Solar Capital has a market cap of $754.6 million and is part of the financial services industry. Shares are down 1.3% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Solar 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 a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:

  • The gross profit margin for SOLAR CAPITAL LTD is currently very high, coming in at 70.20%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 42.52% significantly outperformed against the industry average.
  • SLRC, with its decline in revenue, underperformed when compared the industry average of 5.0%. Since the same quarter one year prior, revenues fell by 21.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • SOLAR CAPITAL LTD's earnings per share declined by 16.1% in the most recent quarter compared to 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 ($1.53 versus $1.12).
  • Net operating cash flow has significantly decreased to -$23.67 million or 123.89% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, SLRC has underperformed the S&P 500 Index, declining 12.36% from its price level of one year ago. 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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FS Investment

Dividend Yield: 8.80%

FS Investment

(NYSE:

FSIC

) shares currently have a dividend yield of 8.80%.

FS Investment Corporation is a business development company specializing in investments in debt securities. It seeks to purchase interests in loans through secondary market transactions or directly from the target companies as primary market investments. The company has a P/E ratio of 9.94.

The average volume for FS Investment has been 713,600 shares per day over the past 30 days. FS Investment has a market cap of $2.5 billion and is part of the financial services industry. Shares are up 0.9% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

FS Investment

as a

hold

. The company's strengths can be seen in multiple areas, such as its expanding profit margins and notable return on equity. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.

Highlights from the ratings report include:

  • The gross profit margin for FS INVESTMENT CORP is rather high; currently it is at 63.47%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 64.82% significantly outperformed against the industry average.
  • In its most recent trading session, FSIC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and the Capital Markets industry average. The net income has decreased by 12.0% when compared to the same quarter one year ago, dropping from $80.06 million to $70.43 million.
  • Net operating cash flow has significantly decreased to $23.21 million or 74.64% 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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Och-Ziff Capital Management Group

Dividend Yield: 7.60%

Och-Ziff Capital Management Group

(NYSE:

OZM

) shares currently have a dividend yield of 7.60%.

Och-Ziff Capital Management Group LLC is a publicly owned hedge fund sponsor. The firm provides investment advisory services for its clients. It invests in equity markets across the world. The firm makes its investments in alternative markets across the world. The company has a P/E ratio of 14.49.

The average volume for Och-Ziff Capital Management Group has been 527,800 shares per day over the past 30 days. Och-Ziff Capital Management Group has a market cap of $2.0 billion and is part of the financial services industry. Shares are down 0.3% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Och-Ziff Capital Management Group

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and expanding profit margins. 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 5.0%. Since the same quarter one year prior, revenues rose by 16.6%. 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 Capital Markets industry. The net income increased by 8.5% when compared to the same quarter one year prior, going from $23.85 million to $25.87 million.
  • 46.68% is the gross profit margin for OCH-ZIFF CAPITAL MGMT LLC which we consider to be strong. Regardless of OZM'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 7.77% trails the industry average.
  • OZM has underperformed the S&P 500 Index, declining 17.88% 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 $149.27 million or 75.37% 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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