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: 11.30%

MFA Financial (NYSE: MFA) shares currently have a dividend yield of 11.30%.

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 8.73.

The average volume for MFA Financial has been 2,058,900 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 13.1% year-to-date as of the close of trading on Tuesday.

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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 9.8%. 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 13.29%.
  • MFA has underperformed the S&P 500 Index, declining 15.25% 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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FirstEnergy

Dividend Yield: 4.60%

FirstEnergy (NYSE: FE) shares currently have a dividend yield of 4.60%.

FirstEnergy Corp., through its subsidiaries, generates, transmits, and distributes electricity in the United States. The company operates through Regulated Distribution, Regulated Transmission, and Competitive Energy Services segments. The company has a P/E ratio of 30.38.

The average volume for FirstEnergy has been 3,499,800 shares per day over the past 30 days. FirstEnergy has a market cap of $13.2 billion and is part of the utilities industry. Shares are down 20% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates FirstEnergy as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, growth in earnings per share and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and disappointing return on equity.

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 Electric Utilities industry. The net income increased by 192.2% when compared to the same quarter one year prior, rising from $64.00 million to $187.00 million.
  • FIRSTENERGY CORP reported significant earnings per share improvement 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, FIRSTENERGY CORP reported lower earnings of $0.50 versus $0.90 in the prior year. This year, the market expects an improvement in earnings ($2.65 versus $0.50).
  • Currently the debt-to-equity ratio of 1.82 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 this, the company manages to maintain a quick ratio of 0.27, which clearly demonstrates the inability to cover short-term cash needs.
  • 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 Electric Utilities industry and the overall market, FIRSTENERGY CORP's return on equity is below that of both the industry average and the S&P 500.

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Royal Dutch Shell

Dividend Yield: 7.00%

Royal Dutch Shell (NYSE: RDS.A) shares currently have a dividend yield of 7.00%.

Royal Dutch Shell plc operates as an independent oil and gas company worldwide. It operates through Upstream and Downstream segments. The company explores for and extracts crude oil, natural gas, and natural gas liquids. The company has a P/E ratio of 22.62.

The average volume for Royal Dutch Shell has been 4,209,700 shares per day over the past 30 days. Royal Dutch Shell has a market cap of $170.7 billion and is part of the energy industry. Shares are down 21.6% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Royal Dutch Shell 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 and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • RDS.A's debt-to-equity ratio is very low at 0.30 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • RDS.A, with its decline in revenue, slightly underperformed the industry average of 34.1%. Since the same quarter one year prior, revenues fell by 34.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Net operating cash flow has decreased to $6,050.00 million or 29.98% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ROYAL DUTCH SHELL PLC's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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