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."

VEREIT

Dividend Yield: 5.90%

VEREIT

(NYSE:

VER

) shares currently have a dividend yield of 5.90%.

VEREIT, Inc. is a publicly owned real estate investment trust. It owns and acquires single tenant, freestanding commercial real estate that is net leased on a medium-term basis, primarily to investment grade credit rated and other creditworthy tenants.

The average volume for VEREIT has been 6,627,800 shares per day over the past 30 days. VEREIT has a market cap of $8.5 billion and is part of the real estate industry. Shares are up 17.9% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

VEREIT

as a

hold

. The company's strengths can be seen in multiple areas, such as its solid stock price performance and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and weak operating cash flow.

Highlights from the ratings report include:

  • Compared to where it was trading a year ago, VER's share price has not changed very much due to (a) the relatively weak year-over-year performance of the overall market, (b) the company's stagnant earnings, and (c) other mixed results. 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.
  • VEREIT INC 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. 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, VEREIT INC continued to lose money by earning -$0.43 versus -$1.44 in the prior year. This year, the market expects an improvement in earnings (-$0.13 versus -$0.43).
  • VER, with its decline in revenue, underperformed when compared the industry average of 11.9%. Since the same quarter one year prior, revenues slightly dropped by 3.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Net operating cash flow has decreased to $178.61 million or 22.38% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 277.3% when compared to the same quarter one year ago, falling from -$29.97 million to -$113.09 million.

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Western Digital

Dividend Yield: 5.10%

Western Digital

(NASDAQ:

WDC

) shares currently have a dividend yield of 5.10%.

Western Digital Corporation, together with its subsidiaries, engages in the development, manufacture, sale, and provision of data storage solutions that enable consumers, businesses, governments, and other organizations to create, manage, experience, and preserve digital content worldwide. The company has a P/E ratio of 11.14.

The average volume for Western Digital has been 6,396,000 shares per day over the past 30 days. Western Digital has a market cap of $9.2 billion and is part of the computer hardware industry. Shares are down 32.6% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Western Digital

as a

hold

. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income.

Highlights from the ratings report include:

  • WDC's debt-to-equity ratio is very low at 0.23 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.62, which clearly demonstrates the ability to cover short-term cash needs.
  • 36.07% is the gross profit margin for WESTERN DIGITAL CORP which we consider to be strong. Regardless of WDC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WDC's net profit margin of 2.62% is significantly lower than the industry average.
  • WESTERN DIGITAL 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. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, WESTERN DIGITAL CORP reported lower earnings of $6.17 versus $6.69 in the prior year. For the next year, the market is expecting a contraction of 16.4% in earnings ($5.16 versus $6.17).
  • 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 Computers & Peripherals industry. The net income has significantly decreased by 80.7% when compared to the same quarter one year ago, falling from $384.00 million to $74.00 million.

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Royal Dutch Shell

Dividend Yield: 7.60%

Royal Dutch Shell

(NYSE:

RDS.B

) shares currently have a dividend yield of 7.60%.

Royal Dutch Shell plc operates as an independent oil and gas company worldwide. It operates through Upstream and Downstream segments. The company explores for and extracts crude oil, natural gas, and natural gas liquids. The company has a P/E ratio of 6.29.

The average volume for Royal Dutch Shell has been 2,392,900 shares per day over the past 30 days. Royal Dutch Shell has a market cap of $199.4 billion and is part of the energy industry. Shares are up 6.7% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Royal Dutch Shell

as a

hold

. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including deteriorating net income, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:

  • The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels.
  • RDS.B, with its decline in revenue, slightly underperformed the industry average of 24.6%. Since the same quarter one year prior, revenues fell by 26.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • ROYAL DUTCH SHELL PLC 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, ROYAL DUTCH SHELL PLC reported lower earnings of $0.60 versus $4.70 in the prior year. This year, the market expects an improvement in earnings ($4.63 versus $0.60).
  • Net operating cash flow has significantly decreased to $661.00 million or 90.69% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 89.1% when compared to the same quarter one year ago, falling from $4,430.00 million to $484.00 million.

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