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."

Two Harbors Investment

Dividend Yield: 10.70%

Two Harbors Investment (NYSE: TWO) shares currently have a dividend yield of 10.70%.

Two Harbors Investment Corp. operates as a real estate investment trust (REIT) that focuses on investing in, financing, and managing residential mortgage-backed securities (RMBS), residential mortgage loans, mortgage servicing rights, commercial real estate and other financial assets. The company has a P/E ratio of 10.08.

The average volume for Two Harbors Investment has been 2,917,800 shares per day over the past 30 days. Two Harbors Investment has a market cap of $3.0 billion and is part of the real estate industry. Shares are up 5.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Two Harbors Investment 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 expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 74.35% to -$131.68 million when compared to the same quarter last year. In addition, TWO HARBORS INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of 11.47%.
  • The gross profit margin for TWO HARBORS INVESTMENT CORP is rather high; currently it is at 68.68%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, TWO's net profit margin of -72.97% significantly underperformed when compared to the industry average.
  • The share price of TWO HARBORS INVESTMENT CORP has not done very well: it is down 12.12% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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 when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 193.8% when compared to the same quarter one year ago, falling from $94.79 million to -$88.93 million.

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Pier 1 Imports

Dividend Yield: 5.10%

Pier 1 Imports (NYSE: PIR) shares currently have a dividend yield of 5.10%.

Pier 1 Imports, Inc. engages in the retail sale of decorative accessories, furniture, candles, housewares, gifts, and seasonal products. The company has a P/E ratio of 16.75.

The average volume for Pier 1 Imports has been 2,421,900 shares per day over the past 30 days. Pier 1 Imports has a market cap of $457.4 million and is part of the specialty retail industry. Shares are up 4.7% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Pier 1 Imports 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 largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • Net operating cash flow has increased to $33.52 million or 18.29% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -2.48%.
  • The debt-to-equity ratio is somewhat low, currently at 0.75, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that PIR's debt-to-equity ratio is low, the quick ratio, which is currently 0.53, displays a potential problem in covering short-term cash needs.
  • 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 Specialty Retail industry. The net income has significantly decreased by 187.6% when compared to the same quarter one year ago, falling from $6.87 million to -$6.02 million.
  • 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. In comparison to the other companies in the Specialty Retail industry and the overall market, PIER 1 IMPORTS INC/DE'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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Energy Transfer Partners

Dividend Yield: 11.20%

Energy Transfer Partners (NYSE: ETP) shares currently have a dividend yield of 11.20%.

Energy Transfer Partners, L.P. engages in the natural gas midstream, and intrastate transportation and storage businesses in the United States. The company has a P/E ratio of 33.22.

The average volume for Energy Transfer Partners has been 3,715,200 shares per day over the past 30 days. Energy Transfer Partners has a market cap of $19.5 billion and is part of the energy industry. Shares are up 11% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Energy Transfer Partners as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, 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 significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 13.5% when compared to the same quarter one year prior, going from $274.00 million to $311.00 million.
  • Net operating cash flow has significantly increased by 89.72% to $960.00 million when compared to the same quarter last year. In addition, ENERGY TRANSFER PARTNERS -LP has also vastly surpassed the industry average cash flow growth rate of -49.95%.
  • ENERGY TRANSFER PARTNERS -LP has improved earnings per share by 11.8% 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, ENERGY TRANSFER PARTNERS -LP swung to a loss, reporting -$0.08 versus $1.64 in the prior year. This year, the market expects an improvement in earnings ($0.68 versus -$0.08).
  • ETP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 27.07%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • The debt-to-equity ratio of 1.39 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, ETP has a quick ratio of 0.57, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

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