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."

Western Gas Partners

Dividend Yield: 6.50%

Western Gas Partners

(NYSE:

WES

) shares currently have a dividend yield of 6.50%.

Western Gas Partners, LP owns, operates, acquires, and develops midstream energy assets in the Rocky Mountains, the Mid-Continent, North-central Pennsylvania, and Texas. The company has a P/E ratio of 25.48.

The average volume for Western Gas Partners has been 350,200 shares per day over the past 30 days. Western Gas Partners has a market cap of $6.2 billion and is part of the energy industry. Shares are down 34% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Western Gas Partners

as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, good cash flow from operations, expanding profit margins and growth in earnings per share. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 36.8%. Since the same quarter one year prior, revenues slightly increased by 7.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 47.8% when compared to the same quarter one year prior, rising from $109.16 million to $161.31 million.
  • Net operating cash flow has increased to $196.94 million or 41.10% when compared to the same quarter last year. In addition, WESTERN GAS PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -25.83%.
  • 43.73% is the gross profit margin for WESTERN GAS PARTNERS LP which we consider to be strong. Regardless of WES's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WES's net profit margin of 41.88% significantly outperformed against the industry.
  • WESTERN GAS PARTNERS LP has improved earnings per share by 28.3% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, WESTERN GAS PARTNERS LP increased its bottom line by earning $2.13 versus $1.81 in the prior year. For the next year, the market is expecting a contraction of 13.1% in earnings ($1.85 versus $2.13).

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RR Donnelley & Sons

Dividend Yield: 6.50%

RR Donnelley & Sons

(NASDAQ:

RRD

) shares currently have a dividend yield of 6.50%.

R.R. Donnelley & Sons Company provides integrated communications solutions to private and public sector clients in the United States and internationally. The company operates through Publishing and Retail Services, Variable Print, Strategic Services, and International segments. The company has a P/E ratio of 32.67.

The average volume for RR Donnelley & Sons has been 1,567,000 shares per day over the past 30 days. RR Donnelley & Sons has a market cap of $3.3 billion and is part of the diversified services industry. Shares are down 3.8% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

RR Donnelley & Sons

as a

buy

. The company's strongest point has been its 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:

  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.9%. Since the same quarter one year prior, revenues slightly dropped by 4.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • DONNELLEY (R R) & SONS CO 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 year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, DONNELLEY (R R) & SONS CO reported lower earnings of $0.58 versus $1.15 in the prior year. This year, the market expects an improvement in earnings ($1.50 versus $0.58).
  • The gross profit margin for DONNELLEY (R R) & SONS CO is rather low; currently it is at 22.16%. Regardless of RRD's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.50% trails the industry average.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Commercial Services & Supplies industry and the overall market on the basis of return on equity, DONNELLEY (R R) & SONS CO has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • In its most recent trading session, RRD has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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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Vector Group

Dividend Yield: 6.50%

Vector Group

(NYSE:

VGR

) shares currently have a dividend yield of 6.50%.

Vector Group Ltd., through its subsidiaries, primarily manufactures and sells cigarettes in the United States. The company operates through Tobacco, E-Cigarettes, and Real Estate segments. The company has a P/E ratio of 47.54.

The average volume for Vector Group has been 666,500 shares per day over the past 30 days. Vector Group has a market cap of $3.0 billion and is part of the tobacco industry. Shares are up 16.7% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Vector Group

as a

buy

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

  • The revenue growth came in higher than the industry average of 14.5%. Since the same quarter one year prior, revenues rose by 10.9%. 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.
  • Net operating cash flow has increased to $56.13 million or 21.89% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -5.13%.
  • VECTOR GROUP LTD's earnings per share declined by 25.0% 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, VECTOR GROUP LTD increased its bottom line by earning $0.34 versus $0.30 in the prior year. This year, the market expects an improvement in earnings ($0.64 versus $0.34).
  • 44.93% is the gross profit margin for VECTOR GROUP LTD which we consider to be strong. Regardless of VGR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VGR's net profit margin of 3.61% is significantly lower than the industry average.
  • 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. 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.

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