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."

Starwood Property

Dividend Yield: 9.90%

Starwood Property (NYSE: STWD) shares currently have a dividend yield of 9.90%.

Starwood Property Trust, Inc. originates, acquires, finances, and manages commercial mortgage loans, other commercial real estate debt investments, commercial mortgage-backed securities, and other commercial real estate- investments in the United States and Europe. The company has a P/E ratio of 28.62.

The average volume for Starwood Property has been 2,768,800 shares per day over the past 30 days. Starwood Property has a market cap of $4.6 billion and is part of the real estate industry. Shares are down 7.5% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Starwood Property as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry average. The net income increased by 5.4% when compared to the same quarter one year prior, going from $91.51 million to $96.45 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.9%. Since the same quarter one year prior, revenues slightly increased by 3.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • 49.17% is the gross profit margin for STARWOOD PROPERTY TRUST INC which we consider to be strong. Regardless of STWD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, STWD's net profit margin of 50.19% significantly outperformed against the industry.
  • STWD has underperformed the S&P 500 Index, declining 21.03% 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'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, STARWOOD PROPERTY TRUST INC's return on equity is below that of both the industry average and the S&P 500.

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American Capital Agency

Dividend Yield: 12.80%

American Capital Agency (NASDAQ: AGNC) shares currently have a dividend yield of 12.80%.

American Capital Agency Corp. operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 34.57.

The average volume for American Capital Agency has been 4,031,100 shares per day over the past 30 days. American Capital Agency has a market cap of $6.3 billion and is part of the real estate industry. Shares are up 6.6% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates American Capital Agency as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. 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:
  • AMERICAN CAPITAL AGENCY CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, AMERICAN CAPITAL AGENCY CORP turned its bottom line around by earning $0.56 versus -$0.73 in the prior year. This year, the market expects an improvement in earnings ($2.18 versus $0.56).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 282.6% when compared to the same quarter one year prior, rising from -$322.00 million to $588.00 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN CAPITAL AGENCY CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • AGNC has underperformed the S&P 500 Index, declining 13.25% 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.

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Bank of Montreal

Dividend Yield: 4.20%

Bank of Montreal (NYSE: BMO) shares currently have a dividend yield of 4.20%.

Bank of Montreal provides diversified financial services primarily in North America. The company has a P/E ratio of 12.75.

The average volume for Bank of Montreal has been 800,900 shares per day over the past 30 days. Bank of Montreal has a market cap of $38.8 billion and is part of the banking industry. Shares are up 5.5% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Bank of Montreal as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins, growth in earnings per share and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • The gross profit margin for BANK OF MONTREAL is currently very high, coming in at 79.66%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.41% is above that of the industry average.
  • BANK OF MONTREAL has improved earnings per share by 8.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. During the past fiscal year, BANK OF MONTREAL increased its bottom line by earning $6.58 versus $6.41 in the prior year.
  • 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 Commercial Banks industry average. The net income increased by 7.5% when compared to the same quarter one year prior, going from $986.00 million to $1,060.00 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. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, BANK OF MONTREAL has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Net operating cash flow has declined marginally to $9,419.00 million or 3.92% when compared to the same quarter last year. Despite a decrease in cash flow BANK OF MONTREAL is still fairing well by exceeding its industry average cash flow growth rate of -53.23%.

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