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 "Buy."

Digital Realty

Dividend Yield: 4.30%

Digital Realty

(NYSE:

DLR

) shares currently have a dividend yield of 4.30%.

Digital Realty Trust, Inc., a real estate investment trust (REIT), through its controlling interest in Digital Realty Trust, L.P., engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate. The company has a P/E ratio of 53.54.

The average volume for Digital Realty has been 1,326,600 shares per day over the past 30 days. Digital Realty has a market cap of $11.6 billion and is part of the real estate industry. Shares are up 4.8% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Digital Realty

as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.2%. Since the same quarter one year prior, revenues slightly increased by 5.7%. 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 increased to $184.06 million or 17.00% when compared to the same quarter last year. In addition, DIGITAL REALTY TRUST INC has also vastly surpassed the industry average cash flow growth rate of -51.84%.
  • DIGITAL REALTY TRUST INC 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. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, DIGITAL REALTY TRUST INC reported lower earnings of $0.98 versus $2.10 in the prior year. This year, the market expects an improvement in earnings ($2.05 versus $0.98).
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • 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 55.4% when compared to the same quarter one year ago, falling from $127.77 million to $56.98 million.

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EastGroup Properties

Dividend Yield: 4.70%

EastGroup Properties

(NYSE:

EGP

) shares currently have a dividend yield of 4.70%.

EastGroup Properties, Inc., a real estate investment trust (REIT), focuses on the development, acquisition, and operation of industrial properties in the United States. The company has a P/E ratio of 34.01.

The average volume for EastGroup Properties has been 178,300 shares per day over the past 30 days. EastGroup Properties has a market cap of $1.6 billion and is part of the real estate industry. Shares are down 8.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

EastGroup Properties

as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster 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 7.2%. Since the same quarter one year prior, revenues slightly increased by 6.6%. 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.
  • 39.48% is the gross profit margin for EASTGROUP PROPERTIES which we consider to be strong. Regardless of EGP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 18.66% trails the industry average.
  • EASTGROUP PROPERTIES's earnings per share declined by 12.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, EASTGROUP PROPERTIES reported lower earnings of $1.48 versus $1.52 in the prior year. This year, the market expects an improvement in earnings ($1.60 versus $1.48).
  • The change in net income 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 has decreased by 10.1% when compared to the same quarter one year ago, dropping from $12.72 million to $11.44 million.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, EGP has underperformed the S&P 500 Index, declining 19.85% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

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Southern

Dividend Yield: 4.50%

Southern

(NYSE:

SO

) shares currently have a dividend yield of 4.50%.

The Southern Company, together with its subsidiaries, operates as a public electric utility company. The company has a P/E ratio of 18.43.

The average volume for Southern has been 5,310,200 shares per day over the past 30 days. Southern has a market cap of $43.5 billion and is part of the utilities industry. Shares are up 2.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Southern

as a

buy

. The company's strengths can be seen in multiple areas, such as its expanding profit margins and solid stock price performance. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:

  • SOUTHERN CO' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, SOUTHERN CO increased its bottom line by earning $2.60 versus $2.18 in the prior year. This year, the market expects an improvement in earnings ($2.85 versus $2.60).
  • 36.02% is the gross profit margin for SOUTHERN CO which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.84% trails the industry average.
  • SO, with its decline in revenue, slightly underperformed the industry average of 8.1%. Since the same quarter one year prior, revenues fell by 10.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Compared to where it was trading a year ago, SO's share price has not changed very much due to (a) the relatively weak year-over-year performance of the overall market, (b) the company's stagnant earnings, and (c) other mixed results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and the Electric Utilities industry average. The net income has decreased by 5.7% when compared to the same quarter one year ago, dropping from $300.00 million to $283.00 million.

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