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: 11.50%

Medallion Financial

(NASDAQ:

TAXI

) shares currently have a dividend yield of 11.50%.

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 7.81.

The average volume for Medallion Financial has been 283,500 shares per day over the past 30 days. Medallion Financial has a market cap of $214.5 million and is part of the financial services industry. Shares are down 15.4% year-to-date as of the close of trading on Thursday.

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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 robust revenue growth, increase in net income and expanding profit margins. 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 came in higher than the industry average of 5.0%. Since the same quarter one year prior, revenues rose by 28.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for MEDALLION FINANCIAL CORP is rather high; currently it is at 60.17%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 59.45% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 127.28% to $0.78 million when compared to the same quarter last year. Despite an increase in cash flow, MEDALLION FINANCIAL CORP's average is still marginally south of the industry average growth rate of 135.40%.
  • MEDALLION FINANCIAL CORP has improved earnings per share by 7.4% 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, MEDALLION FINANCIAL CORP reported lower earnings of $1.14 versus $1.16 in the prior year. This year, the market expects an improvement in earnings ($1.18 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 30.60%, 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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Permian Basin Royalty

Dividend Yield: 9.50%

Permian Basin Royalty

(NYSE:

PBT

) shares currently have a dividend yield of 9.50%.

Permian Basin Royalty Trust, an express trust, holds overriding royalty interests in various oil and gas properties in the United States. The company has a P/E ratio of 6.39.

The average volume for Permian Basin Royalty has been 112,300 shares per day over the past 30 days. Permian Basin Royalty has a market cap of $303.9 million and is part of the energy industry. Shares are down 31.5% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

TheStreet Recommends

Permian Basin Royalty

as a

hold

. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • PBT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, PBT has a quick ratio of 1.71, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for PERMIAN BASIN ROYALTY TRUST is currently very high, coming in at 100.00%. PBT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, PBT's net profit margin of 90.36% significantly outperformed against the industry.
  • PERMIAN BASIN ROYALTY TRUST 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 not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, PERMIAN BASIN ROYALTY TRUST increased its bottom line by earning $1.02 versus $0.87 in the prior year.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 49.35%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 64.00% compared to the year-earlier 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.
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 64.2% when compared to the same quarter one year ago, falling from $11.70 million to $4.18 million.

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United Development Funding IV

Dividend Yield: 9.20%

United Development Funding IV

(NASDAQ:

UDF

) shares currently have a dividend yield of 9.20%.

United Development Funding IV operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 11.09.

The average volume for United Development Funding IV has been 197,800 shares per day over the past 30 days. United Development Funding IV has a market cap of $543.9 million and is part of the real estate industry. Shares are down 3% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

United Development Funding IV

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. 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:

  • UDF's revenue growth has slightly outpaced the industry average of 6.9%. Since the same quarter one year prior, revenues slightly increased by 9.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • UNITED DEV FUNDING IV has improved earnings per share by 34.3% in the most recent quarter compared to the same quarter a year ago.
  • The gross profit margin for UNITED DEV FUNDING IV is currently very high, coming in at 74.94%. Regardless of UDF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, UDF's net profit margin of 63.17% significantly outperformed against the industry.
  • In its most recent trading session, UDF 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.
  • When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, UNITED DEV FUNDING IV's return on equity is below that of both the industry average and the S&P 500.

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