Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer

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."

Healthcare Realty

Dividend Yield: 4.50%

Healthcare Realty

(NYSE:

HR

) shares currently have a dividend yield of 4.50%.

Healthcare Realty Trust Incorporated is an independent real estate investment trust. The firm invests in real estate markets of the United States. The company has a P/E ratio of 77.03.

The average volume for Healthcare Realty has been 684,700 shares per day over the past 30 days. Healthcare Realty has a market cap of $2.7 billion and is part of the real estate industry. Shares are down 1.3% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Healthcare Realty

as a

buy

. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 45.9% when compared to the same quarter one year prior, rising from $12.38 million to $18.07 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.4%. Since the same quarter one year prior, revenues slightly increased by 7.0%. 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.
  • HEALTHCARE REALTY TRUST INC's earnings per share declined by 10.0% 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, HEALTHCARE REALTY TRUST INC turned its bottom line around by earning $0.35 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings ($0.44 versus $0.35).
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of 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 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, HEALTHCARE REALTY TRUST INC's return on equity significantly trails that of both the industry average and the S&P 500.

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Hersha Hospitality

Dividend Yield: 4.20%

Hersha Hospitality

(NYSE:

HT

) shares currently have a dividend yield of 4.20%.

Operates as a Maryland REIT that focuses primarily on owning and operating high quality, upscale and mid-scale limited service and extended-stay hotels. Its portfolio consisted of 31 wholly-owned limited and full service properties and joint venture investments in 16 hotels as of Dec. 31, 2005. The company has a P/E ratio of 24.41.

The average volume for Hersha Hospitality has been 2,032,600 shares per day over the past 30 days. Hersha Hospitality has a market cap of $1.3 billion and is part of the real estate industry. Shares are down 6.3% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Hersha Hospitality

as a

buy

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

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 9.4%. Since the same quarter one year prior, revenues rose by 24.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • This stock has managed to rise its share value by 14.43% over the past twelve months. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • Net operating cash flow has significantly increased by 71.37% to $34.39 million when compared to the same quarter last year. In addition, HERSHA HOSPITALITY TRUST has also vastly surpassed the industry average cash flow growth rate of 11.50%.
  • HERSHA HOSPITALITY TRUST has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, HERSHA HOSPITALITY TRUST increased its bottom line by earning $0.27 versus $0.02 in the prior year. For the next year, the market is expecting a contraction of 44.4% in earnings ($0.15 versus $0.27).

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Hospitality Properties

Dividend Yield: 6.40%

Hospitality Properties

(NYSE:

HPT

) shares currently have a dividend yield of 6.40%.

Hospitality Properties Trust, a real estate investment trust (REIT), engages in buying, owning, and leasing hotels. The company has a P/E ratio of 26.62.

The average volume for Hospitality Properties has been 808,800 shares per day over the past 30 days. Hospitality Properties has a market cap of $4.7 billion and is part of the real estate industry. Shares are up 1.3% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Hospitality Properties

as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • HPT's revenue growth has slightly outpaced the industry average of 9.4%. Since the same quarter one year prior, revenues rose by 11.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • HOSPITALITY PROPERTIES TRUST 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 two years. We feel that this trend should continue. During the past fiscal year, HOSPITALITY PROPERTIES TRUST increased its bottom line by earning $1.18 versus $0.73 in the prior year. This year, the market expects an improvement in earnings ($1.42 versus $1.18).
  • 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 72.6% when compared to the same quarter one year prior, rising from $32.75 million to $56.52 million.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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