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: 11.70%

MFA Financial (NYSE: MFA) shares currently have a dividend yield of 11.70%.

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 8.30.

The average volume for MFA Financial has been 2,044,900 shares per day over the past 30 days. MFA Financial has a market cap of $2.5 billion and is part of the real estate industry. Shares are down 15.9% year-to-date as of the close of trading on Monday.

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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 find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.0%. Since the same quarter one year prior, revenues slightly increased by 3.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 0.8% when compared to the same quarter one year prior, going from $78.88 million to $79.51 million.
  • 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, MFA FINANCIAL INC's return on equity is below that of both the industry average and the S&P 500.
  • MFA has underperformed the S&P 500 Index, declining 16.33% 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.

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Targa Resources

Dividend Yield: 7.50%

Targa Resources (NYSE: TRGP) shares currently have a dividend yield of 7.50%.

Targa Resources Corp., through its general and limited partner interests in Targa Resources Partners LP, provides midstream natural gas and natural gas liquid (NGL) services in the United States. The company operates in two divisions, Gathering and Processing, and Logistics and Marketing. The company has a P/E ratio of 31.21.

The average volume for Targa Resources has been 954,700 shares per day over the past 30 days. Targa Resources has a market cap of $2.7 billion and is part of the energy industry. Shares are down 55.2% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Targa Resources as a hold. The company's strongest point has been its expanding profit margins. At the same time, however, 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:
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 37.2%. Since the same quarter one year prior, revenues fell by 28.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 58.4% when compared to the same quarter one year ago, falling from $30.80 million to $12.80 million.
  • TARGA RESOURCES 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, TARGA RESOURCES CORP increased its bottom line by earning $2.44 versus $1.55 in the prior year. For the next year, the market is expecting a contraction of 58.6% in earnings ($1.01 versus $2.44).
  • The gross profit margin for TARGA RESOURCES CORP is rather low; currently it is at 17.23%. Regardless of TRGP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, TRGP's net profit margin of 0.78% compares favorably to the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 58.21%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 68.49% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

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Teekay

Dividend Yield: 7.50%

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

Teekay Corporation primarily provides crude oil and gas marine transportation services in Bermuda and internationally. The company has a P/E ratio of 72.00.

The average volume for Teekay has been 588,100 shares per day over the past 30 days. Teekay has a market cap of $2.1 billion and is part of the transportation industry. Shares are down 44.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Teekay as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and generally higher debt management risk.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 37.2%. Since the same quarter one year prior, revenues rose by 24.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 231.61% to $297.24 million when compared to the same quarter last year. In addition, TEEKAY CORP has also vastly surpassed the industry average cash flow growth rate of -27.14%.
  • TEEKAY 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TEEKAY CORP continued to lose money by earning -$0.77 versus -$1.62 in the prior year. This year, the market expects an improvement in earnings ($1.20 versus -$0.77).
  • 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 615.4% when compared to the same quarter one year ago, falling from $2.37 million to -$12.24 million.
  • The debt-to-equity ratio is very high at 6.55 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.

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