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."

MFA Financial

Dividend Yield: 11.40%

MFA Financial (NYSE: MFA) shares currently have a dividend yield of 11.40%.

MFA Financial, Inc., a real estate investment trust (REIT), invests in residential agency and non-agency mortgage-backed securities (MBS), and residential whole loans in the United States (the U.S.). The company has a P/E ratio of 8.68.

The average volume for MFA Financial has been 2,212,600 shares per day over the past 30 days. MFA Financial has a market cap of $2.6 billion and is part of the real estate industry. Shares are down 11.8% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates MFA Financial 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 unimpressive growth in net income 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 9.7%. Since the same quarter one year prior, revenues slightly increased by 4.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • Net operating cash flow has slightly increased to $70.94 million or 6.35% when compared to the same quarter last year. Despite an increase in cash flow, MFA FINANCIAL INC's average is still marginally south of the industry average growth rate of 15.97%.
  • MFA has underperformed the S&P 500 Index, declining 13.49% 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.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income has decreased by 0.8% when compared to the same quarter one year ago, dropping from $78.73 million to $78.07 million.

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BP

Dividend Yield: 7.50%

BP (NYSE: BP) shares currently have a dividend yield of 7.50%.

BP p.l.c. operates as an integrated oil and gas company worldwide. It operates in three segments: Upstream, Downstream, and Rosneft. The company has a P/E ratio of 4.35.

The average volume for BP has been 6,438,500 shares per day over the past 30 days. BP has a market cap of $107.2 billion and is part of the energy industry. Shares are down 15.5% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates BP as a hold. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. 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:
  • The current debt-to-equity ratio, 0.54, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.00, which illustrates the ability to avoid short-term cash problems.
  • BP, with its decline in revenue, slightly underperformed the industry average of 34.4%. Since the same quarter one year prior, revenues fell by 35.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • BP PLC 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, BP PLC reported lower earnings of $1.21 versus $7.34 in the prior year. This year, the market expects an improvement in earnings ($2.02 versus $1.21).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, BP PLC's return on equity significantly trails that of both the industry average and the S&P 500.
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 272.8% when compared to the same quarter one year ago, falling from $3,369.00 million to -$5,823.00 million.

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Lexmark International

Dividend Yield: 5.10%

Lexmark International (NYSE: LXK) shares currently have a dividend yield of 5.10%.

Lexmark International, Inc., together with its subsidiaries, operates as a developer, manufacturer, and supplier of printing, imaging, device management, managed print services (MPS), document workflow, and business process and content management solutions worldwide.

The average volume for Lexmark International has been 920,200 shares per day over the past 30 days. Lexmark International has a market cap of $1.7 billion and is part of the computer hardware industry. Shares are down 30.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Lexmark International 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:
  • 48.89% is the gross profit margin for LEXMARK INTL INC which we consider to be strong. 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 -4.06% is in-line with the industry average.
  • The revenue fell significantly faster than the industry average of 36.9%. Since the same quarter one year prior, revenues slightly dropped by 0.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • LEXMARK INTL 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. 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, LEXMARK INTL INC reported lower earnings of $1.23 versus $4.10 in the prior year. This year, the market expects an improvement in earnings ($3.56 versus $1.23).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Computers & Peripherals industry and the overall market, LEXMARK INTL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • 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 Computers & Peripherals industry. The net income has significantly decreased by 196.5% when compared to the same quarter one year ago, falling from $37.50 million to -$36.20 million.

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