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."

GlaxoSmithKline

Dividend Yield: 5.90%

GlaxoSmithKline

(NYSE:

GSK

) shares currently have a dividend yield of 5.90%.

GlaxoSmithKline plc creates, discovers, develops, manufactures, and markets pharmaceutical products, including vaccines, over-the-counter medicines, and health-related consumer products worldwide. The company has a P/E ratio of 13.55.

The average volume for GlaxoSmithKline has been 3,745,000 shares per day over the past 30 days. GlaxoSmithKline has a market cap of $95.3 billion and is part of the drugs industry. Shares are down 6.8% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

GlaxoSmithKline

as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • GSK's revenue growth has slightly outpaced the industry average of 3.6%. Since the same quarter one year prior, revenues slightly increased by 2.7%. 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.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, GLAXOSMITHKLINE PLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for GLAXOSMITHKLINE PLC is rather high; currently it is at 62.96%. Regardless of GSK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GSK's net profit margin of 3.93% is significantly lower than the industry average.
  • GLAXOSMITHKLINE PLC's earnings per share declined by 38.1% 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 two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, GLAXOSMITHKLINE PLC reported lower earnings of $1.77 versus $3.68 in the prior year. This year, the market expects an improvement in earnings ($78.79 versus $1.77).
  • The share price of GLAXOSMITHKLINE PLC has not done very well: it is down 5.26% 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. 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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Old Republic International

Dividend Yield: 4.10%

Old Republic International

(NYSE:

ORI

) shares currently have a dividend yield of 4.10%.

Old Republic International Corporation, through its subsidiaries, engages in the insurance underwriting and related services business primarily in the United States and Canada. The company has a P/E ratio of 12.95.

The average volume for Old Republic International has been 1,629,800 shares per day over the past 30 days. Old Republic International has a market cap of $4.7 billion and is part of the insurance industry. Shares are up 24.9% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Old Republic International

as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, solid stock price performance and increase in net income. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 15.7%. Since the same quarter one year prior, revenues rose by 11.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although ORI's debt-to-equity ratio of 0.25 is very low, it is currently higher than that of the industry average.
  • Powered by its strong earnings growth of 46.66% and other important driving factors, this stock has surged by 30.06% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ORI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 46.6% when compared to the same quarter one year prior, rising from $85.90 million to $125.90 million.
  • Net operating cash flow has significantly increased by 148.45% to $262.80 million when compared to the same quarter last year. In addition, OLD REPUBLIC INTL CORP has also vastly surpassed the industry average cash flow growth rate of -13.52%.

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W P Carey

Dividend Yield: 6.50%

W P Carey

(NYSE:

WPC

) shares currently have a dividend yield of 6.50%.

W. P. Carey Inc. is an independent equity real estate investment trust. The firm also provides long-term sale-leaseback and build-to-suit financing for companies. It invests in the real estate markets across the globe. The company has a P/E ratio of 42.39.

The average volume for W P Carey has been 333,800 shares per day over the past 30 days. W P Carey has a market cap of $6.2 billion and is part of the real estate industry. Shares are down 15.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

W P Carey

as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations 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:

  • WPC's revenue growth has slightly outpaced the industry average of 6.1%. Since the same quarter one year prior, revenues slightly increased by 8.9%. 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.
  • W P CAREY INC's earnings per share declined by 25.9% 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, W P CAREY INC increased its bottom line by earning $2.15 versus $1.21 in the prior year. This year, the market expects an improvement in earnings ($2.90 versus $2.15).
  • Net operating cash flow has slightly increased to $114.85 million or 5.83% when compared to the same quarter last year. Despite an increase in cash flow, W P CAREY INC's average is still marginally south of the industry average growth rate of 9.44%.
  • 44.68% is the gross profit margin for W P CAREY INC which we consider to be strong. Regardless of WPC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WPC's net profit margin of 9.56% is significantly lower than the industry average.
  • The share price of W P CAREY INC has not done very well: it is down 13.72% 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. Despite the stock's decline during the last year, it is still somewhat more expensive (in proportion to its earnings over the last year) than most other stocks in its industry. We feel, however, that other strengths this company displays offset this slight negative.

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