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."

Evolving Systems

Dividend Yield: 7.50%

Evolving Systems (NASDAQ: EVOL) shares currently have a dividend yield of 7.50%.

Evolving Systems, Inc. provides software solutions and services to the wireless, wireline, and cable markets in the United Kingdom, Nigeria, Mexico, and internationally. The company has a P/E ratio of 14.27.

The average volume for Evolving Systems has been 23,100 shares per day over the past 30 days. Evolving Systems has a market cap of $68.3 million and is part of the computer software & services industry. Shares are down 38.4% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Evolving Systems 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, notable return on equity and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • EVOL's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, EVOL has a quick ratio of 2.01, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 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 Software industry and the overall market, EVOLVING SYSTEMS INC's return on equity exceeds that of both the industry average and the S&P 500.
  • EVOL, with its decline in revenue, underperformed when compared the industry average of 11.7%. Since the same quarter one year prior, revenues fell by 23.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 37.29%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 50.00% 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.
  • Net operating cash flow has declined marginally to $0.31 million or 5.23% when compared to the same quarter last year. Despite a decrease in cash flow EVOLVING SYSTEMS INC is still fairing well by exceeding its industry average cash flow growth rate of -28.91%.

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Altisource Residential Corporation

Dividend Yield: 14.50%

Altisource Residential Corporation (NYSE: RESI) shares currently have a dividend yield of 14.50%.

Altisource Residential Corporation, through its subsidiary, Altisource Residential, L.P., focuses on acquiring, owning, and managing single-family rental properties in the United States. The company has a P/E ratio of 8.37.

The average volume for Altisource Residential Corporation has been 400,400 shares per day over the past 30 days. Altisource Residential Corporation has a market cap of $866.8 million and is part of the real estate industry. Shares are down 20.9% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Altisource Residential Corporation 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:
  • The revenue fell significantly faster than the industry average of 9.7%. Since the same quarter one year prior, revenues fell by 34.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • ALTISOURCE RESIDENTIAL 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 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, ALTISOURCE RESIDENTIAL CORP increased its bottom line by earning $3.33 versus $1.16 in the prior year. For the next year, the market is expecting a contraction of 66.7% in earnings ($1.11 versus $3.33).
  • 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 80.7% when compared to the same quarter one year ago, falling from $67.78 million to $13.09 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, ALTISOURCE RESIDENTIAL CORP's return on equity is below that of both the industry average and the S&P 500.

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LRR Energy

Dividend Yield: 16.70%

LRR Energy (NYSE: LRE) shares currently have a dividend yield of 16.70%.

LRR Energy, L.P., through its subsidiary, LRE Operating, LLC, operates, acquires, exploits, and develops producing oil and natural gas properties in North America. The company has a P/E ratio of 5.91.

The average volume for LRR Energy has been 201,700 shares per day over the past 30 days. LRR Energy has a market cap of $126.1 million and is part of the energy industry. Shares are down 37.1% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates LRR Energy as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and poor profit margins.

Highlights from the ratings report include:
  • Net operating cash flow has increased to $20.31 million or 30.69% when compared to the same quarter last year. In addition, LRR ENERGY LP has also vastly surpassed the industry average cash flow growth rate of -20.29%.
  • LRE, with its decline in revenue, slightly underperformed the industry average of 34.4%. Since the same quarter one year prior, revenues fell by 38.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 204.1% when compared to the same quarter one year ago, falling from -$7.34 million to -$22.31 million.
  • Currently the debt-to-equity ratio of 1.86 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, LRE maintains a poor quick ratio of 0.76, which illustrates the inability to avoid short-term cash problems.

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