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."

Select Income REIT

Dividend Yield: 9.90%

Select Income REIT

(NYSE:

SIR

) shares currently have a dividend yield of 9.90%.

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 16.58.

The average volume for Select Income REIT has been 515,700 shares per day over the past 30 days. Select Income REIT has a market cap of $1.8 billion and is part of the real estate industry. Shares are down 17.1% year-to-date as of the close of trading on Tuesday.

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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, attractive 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 9.8%. Since the same quarter one year prior, revenues leaped by 89.2%. 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 gross profit margin for SELECT INCOME REIT is rather high; currently it is at 52.25%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 27.17% trails the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income has decreased by 3.5% when compared to the same quarter one year ago, dropping from $30.21 million to $29.14 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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EnLink Midstream Partners

Dividend Yield: 9.20%

EnLink Midstream Partners

(NYSE:

ENLK

) shares currently have a dividend yield of 9.20%.

Enlink Midstream Partners, LP, through its subsidiary, EnLink Midstream Operating, LP, provides midstream energy services. The company has a P/E ratio of 30.67.

The average volume for EnLink Midstream Partners has been 675,700 shares per day over the past 30 days. EnLink Midstream Partners has a market cap of $4.8 billion and is part of the energy industry. Shares are down 44.6% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

TheStreet Recommends

EnLink Midstream Partners

as a

hold

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures 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, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 34.1%. Since the same quarter one year prior, revenues rose by 37.4%. 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 current debt-to-equity ratio, 0.47, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.04, which illustrates the ability to avoid short-term cash problems.
  • 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ENLINK MIDSTREAM PARTNERS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for ENLINK MIDSTREAM PARTNERS LP is currently extremely low, coming in at 14.66%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.35% trails that of the industry average.

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NRG Energy

Dividend Yield: 4.40%

NRG Energy

(NYSE:

NRG

) shares currently have a dividend yield of 4.40%.

NRG Energy, Inc., together with its subsidiaries, operates as a power company. The company has a P/E ratio of 46.96.

The average volume for NRG Energy has been 7,001,100 shares per day over the past 30 days. NRG Energy has a market cap of $4.3 billion and is part of the utilities industry. Shares are down 53.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

NRG Energy

as a

hold

. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income 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, generally higher debt management risk and poor profit margins.

Highlights from the ratings report include:

  • NRG ENERGY INC 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, NRG ENERGY INC turned its bottom line around by earning $0.21 versus -$1.22 in the prior year. This year, the market expects an improvement in earnings ($0.75 versus $0.21).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Independent Power Producers & Energy Traders industry. The net income increased by 85.6% when compared to the same quarter one year prior, rising from -$97.00 million to -$14.00 million.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 15.3%. Since the same quarter one year prior, revenues slightly dropped by 6.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • NRG's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 48.87%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
  • The debt-to-equity ratio is very high at 2.10 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, NRG maintains a poor quick ratio of 0.90, which illustrates the inability to avoid short-term cash problems.

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