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 Senior Capital

Dividend Yield: 10.30%

Solar Senior Capital

(NASDAQ:

SUNS

) shares currently have a dividend yield of 10.30%.

Solar Senior Capital Ltd. is a business development company specializing in investments in leveraged, middle-market companies in the United States. The fund invests in the form of senior secured loans, including first lien, unitranche, and second lien debt instruments. The company has a P/E ratio of 13.55.

The average volume for Solar Senior Capital has been 25,800 shares per day over the past 30 days. Solar Senior Capital has a market cap of $157.9 million and is part of the financial services industry. Shares are down 5.4% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Solar Senior Capital

as a

hold

. The company's strengths can be seen in multiple areas, such as its robust 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 4.2%. Since the same quarter one year prior, revenues rose by 22.5%. 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 SENIOR CAPITAL LTD is currently very high, coming in at 76.38%. Regardless of SUNS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SUNS's net profit margin of -22.92% significantly underperformed when compared to the industry average.
  • SOLAR SENIOR 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 SENIOR CAPITAL LTD reported lower earnings of $1.02 versus $1.11 in the prior year. This year, the market expects an improvement in earnings ($1.42 versus $1.02).
  • Net operating cash flow has significantly decreased to -$3.14 million or 103.99% 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 SENIOR CAPITAL LTD is down 11.45% when compared to where it was trading one year earlier. This reflects both (a) the trend in the overall market as well as (b) the sharp decline in the company's earnings per share. 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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Arbor Realty

Dividend Yield: 9.10%

Arbor Realty

(NYSE:

ABR

) shares currently have a dividend yield of 9.10%.

Arbor Realty Trust, Inc., a specialized real estate finance company, invests in various structured finance investments. The company has a P/E ratio of 7.34.

The average volume for Arbor Realty has been 134,400 shares per day over the past 30 days. Arbor Realty has a market cap of $336.9 million and is part of the real estate industry. Shares are down 4.9% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Arbor Realty

as a

hold

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

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 2.8%. 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 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 73.6% when compared to the same quarter one year ago, falling from $65.29 million to $17.23 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, ARBOR REALTY TRUST INC's return on equity is below that of both the industry average and the S&P 500.

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Ellington Financial

Dividend Yield: 11.40%

Ellington Financial

(NYSE:

EFC

) shares currently have a dividend yield of 11.40%.

Ellington Financial LLC, a specialty finance company, acquires and manages mortgage-related assets, including residential mortgage backed securities backed by prime jumbo, Alt-A, manufactured housing and subprime residential mortgage loans, and residential mortgage-backed securities. The company has a P/E ratio of 15.54.

The average volume for Ellington Financial has been 126,300 shares per day over the past 30 days. Ellington Financial has a market cap of $586.8 million and is part of the real estate industry. Shares are up 1.7% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Ellington Financial

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

Highlights from the ratings report include:

  • The gross profit margin for ELLINGTON FINANCIAL LLC is rather high; currently it is at 69.28%. Regardless of EFC'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 7.40% trails the industry average.
  • EFC, with its decline in revenue, underperformed when compared the industry average of 4.2%. Since the same quarter one year prior, revenues fell by 16.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • ELLINGTON FINANCIAL LLC's earnings per share declined by 37.5% 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, ELLINGTON FINANCIAL LLC reported lower earnings of $1.13 versus $2.23 in the prior year. This year, the market expects an improvement in earnings ($2.21 versus $1.13).
  • The share price of ELLINGTON FINANCIAL LLC has not done very well: it is down 12.75% 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. 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 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 Capital Markets industry and the overall market, ELLINGTON FINANCIAL LLC's return on equity is below that of both the industry average and the S&P 500.

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