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."

Medallion Financial

Dividend Yield: 11.40%

Medallion Financial

(NASDAQ:

TAXI

) shares currently have a dividend yield of 11.40%.

Medallion Financial Corp., through its subsidiaries, operates as a specialty finance company in the United States. The company engages in originating, acquiring, and servicing loans that finance taxicab medallions and various types of commercial businesses. The company has a P/E ratio of 7.06.

The average volume for Medallion Financial has been 345,500 shares per day over the past 30 days. Medallion Financial has a market cap of $215.4 million and is part of the financial services industry. Shares are down 12.5% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Medallion Financial

as a

hold

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

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 Capital Markets industry. The net income increased by 9.2% when compared to the same quarter one year prior, going from $6.69 million to $7.31 million.
  • The gross profit margin for MEDALLION FINANCIAL CORP is rather high; currently it is at 61.54%. Regardless of TAXI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TAXI's net profit margin of 67.79% significantly outperformed against the industry.
  • 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. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, MEDALLION FINANCIAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • MEDALLION FINANCIAL CORP has improved earnings per share by 11.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, MEDALLION FINANCIAL CORP reported lower earnings of $1.14 versus $1.16 in the prior year. For the next year, the market is expecting a contraction of 5.7% in earnings ($1.08 versus $1.14).
  • TAXI'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 26.06%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

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FS Investment

Dividend Yield: 9.10%

FS Investment

(NYSE:

FSIC

) shares currently have a dividend yield of 9.10%.

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 9.55.

The average volume for FS Investment has been 796,000 shares per day over the past 30 days. FS Investment has a market cap of $2.4 billion and is part of the financial services industry. Shares are down 4.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Recommends

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 also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and weak operating cash flow.

Highlights from the ratings report include:

  • The gross profit margin for FS INVESTMENT CORP is currently very high, coming in at 80.18%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -5.09% is in-line with the industry average.
  • When compared to other companies in the Capital Markets industry and the overall market, FS INVESTMENT CORP's return on equity is below that of both the industry average and the S&P 500.
  • FS INVESTMENT CORP 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. This year, the market expects an improvement in earnings ($0.96 versus $0.78).
  • 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 Capital Markets industry. The net income has significantly decreased by 109.5% when compared to the same quarter one year ago, falling from $55.60 million to -$5.28 million.
  • Net operating cash flow has significantly decreased to -$151.80 million or 1496.60% 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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New York Mortgage

Dividend Yield: 17.50%

New York Mortgage

(NASDAQ:

NYMT

) shares currently have a dividend yield of 17.50%.

New York Mortgage Trust, Inc., a real estate investment trust (REIT), engages in acquiring, investing in, financing, and managing mortgage-related and financial assets in the United States. The company has a P/E ratio of 5.32.

The average volume for New York Mortgage has been 1,214,900 shares per day over the past 30 days. New York Mortgage has a market cap of $599.5 million and is part of the real estate industry. Shares are down 27.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

New York Mortgage

as a

hold

. Among the primary strengths of the company is its attractive valuation levels, considering its current price compared to earnings, book value and other measures. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:

  • NYMT, with its decline in revenue, underperformed when compared the industry average of 6.0%. Since the same quarter one year prior, revenues fell by 21.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • NEW YORK MORTGAGE TRUST INC 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, NEW YORK MORTGAGE TRUST INC increased its bottom line by earning $1.47 versus $1.11 in the prior year. For the next year, the market is expecting a contraction of 42.9% in earnings ($0.84 versus $1.47).
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income has significantly decreased by 35.5% when compared to the same quarter one year ago, falling from $39.73 million to $25.63 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, NEW YORK MORTGAGE TRUST INC's return on equity is below that of both the industry average and the S&P 500.

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