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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 "Hold."

Healthcare Realty

Dividend Yield: 5.00%

Healthcare Realty

(NYSE:

HR

) shares currently have a dividend yield of 5.00%.

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 74.53.

The average volume for Healthcare Realty has been 721,400 shares per day over the past 30 days. Healthcare Realty has a market cap of $2.4 billion and is part of the real estate industry. Shares are down 11.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

TheStreet Recommends

Healthcare Realty

as a

hold

. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor 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 39.7% when compared to the same quarter one year prior, rising from $3.85 million to $5.38 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.6%. Since the same quarter one year prior, revenues slightly increased by 6.5%. 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 37.5% 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 ($0.37 versus $0.35).
  • The gross profit margin for HEALTHCARE REALTY TRUST INC is rather low; currently it is at 24.21%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.57% significantly trails the industry average.
  • The share price of HEALTHCARE REALTY TRUST INC has not done very well: it is down 6.87% 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, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

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Select Income REIT

Dividend Yield: 9.10%

Select Income REIT

(NYSE:

SIR

) shares currently have a dividend yield of 9.10%.

Select Income REIT, a real estate investment trust (REIT), primarily owns and invests in single tenant and net leased properties. The company has a P/E ratio of 15.20.

The average volume for Select Income REIT has been 625,500 shares per day over the past 30 days. Select Income REIT has a market cap of $1.9 billion and is part of the real estate industry. Shares are down 12.9% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Select Income REIT

as a

hold

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

  • SIR's very impressive revenue growth greatly exceeded the industry average of 8.6%. Since the same quarter one year prior, revenues leaped by 78.5%. 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.
  • 35.80% is the gross profit margin for SELECT INCOME REIT which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, SIR's net profit margin of 4.20% is significantly lower than the industry average.
  • 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 84.1% when compared to the same quarter one year ago, falling from $25.06 million to $3.98 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, SELECT INCOME REIT's return on equity is below that of both the industry average and the S&P 500.

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Covanta

Dividend Yield: 4.80%

Covanta

(NYSE:

CVA

) shares currently have a dividend yield of 4.80%.

Covanta Holding Corporation provides waste and energy services to municipal entities primarily worldwide. It owns and operates infrastructure for the conversion of waste to energy, as well as engages in other waste disposal and renewable energy production businesses.

The average volume for Covanta has been 739,600 shares per day over the past 30 days. Covanta has a market cap of $2.8 billion and is part of the materials & construction industry. Shares are down 7.3% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Covanta

as a

hold

. The company's strongest point has been its a solid financial position based on a variety of debt and liquidity measures that we have looked at. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:

  • After a year of stock price fluctuations, the net result is that CVA's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • CVA, with its decline in revenue, slightly underperformed the industry average of 1.1%. Since the same quarter one year prior, revenues slightly dropped by 4.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • COVANTA HOLDING CORP 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 reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, COVANTA HOLDING CORP swung to a loss, reporting -$0.02 versus $0.35 in the prior year. This year, the market expects an improvement in earnings ($0.35 versus -$0.02).
  • Net operating cash flow has significantly decreased to $42.00 million or 59.22% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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 Commercial Services & Supplies industry. The net income has significantly decreased by 311.1% when compared to the same quarter one year ago, falling from -$9.00 million to -$37.00 million.

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