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."

Aircastle

Dividend Yield: 4.90%

Aircastle

(NYSE:

AYR

) shares currently have a dividend yield of 4.90%.

Aircastle Limited, through its subsidiaries, acquires, leases, and sells commercial jet aircraft to airlines. The company also invests in other aviation assets, including debt investments secured by commercial jet aircraft. The company has a P/E ratio of 13.02.

The average volume for Aircastle has been 635,400 shares per day over the past 30 days. Aircastle has a market cap of $1.5 billion and is part of the diversified services industry. Shares are down 5.2% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Aircastle

as a

buy

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

Highlights from the ratings report include:

  • Net operating cash flow has increased to $117.82 million or 26.94% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 1.44%.
  • The gross profit margin for AIRCASTLE LTD is currently very high, coming in at 92.09%. Regardless of AYR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AYR's net profit margin of 25.16% significantly outperformed against the industry.
  • AIRCASTLE LTD's earnings per share declined by 30.0% 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, AIRCASTLE LTD increased its bottom line by earning $1.50 versus $1.25 in the prior year. This year, the market expects an improvement in earnings ($2.00 versus $1.50).
  • AYR, with its decline in revenue, slightly underperformed the industry average of 4.5%. Since the same quarter one year prior, revenues fell by 13.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Trading Companies & Distributors industry and the overall market, AIRCASTLE LTD's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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Packaging Corp of America

Dividend Yield: 4.60%

Packaging Corp of America

(NYSE:

PKG

) shares currently have a dividend yield of 4.60%.

Packaging Corporation of America manufactures and sells containerboard and corrugated packaging products in the United States, Europe, Mexico, and Canada. The company has a P/E ratio of 10.62.

The average volume for Packaging Corp of America has been 1,283,500 shares per day over the past 30 days. Packaging Corp of America has a market cap of $4.6 billion and is part of the consumer non-durables industry. Shares are down 23.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Packaging Corp of America

as a

buy

. The company's strengths can be seen in multiple areas, such as its increase in net income and growth in earnings per share. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Containers & Packaging industry average. The net income increased by 5.8% when compared to the same quarter one year prior, going from $98.51 million to $104.20 million.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.7%. Since the same quarter one year prior, revenues slightly dropped by 3.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • PACKAGING CORP OF AMERICA has improved earnings per share by 7.0% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, PACKAGING CORP OF AMERICA increased its bottom line by earning $4.46 versus $3.99 in the prior year. For the next year, the market is expecting a contraction of 2.8% in earnings ($4.34 versus $4.46).
  • PKG'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 42.20%, 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. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.
  • The gross profit margin for PACKAGING CORP OF AMERICA is currently lower than what is desirable, coming in at 26.62%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 7.49% is above that of the industry average.

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Old Republic International

Dividend Yield: 4.20%

Old Republic International

(NYSE:

ORI

) shares currently have a dividend yield of 4.20%.

Old Republic International Corporation, through its subsidiaries, engages in the insurance underwriting and related services business primarily in the United States and Canada.

The average volume for Old Republic International has been 2,063,600 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 down 3.5% year-to-date as of the close of trading on Friday.

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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, solid stock price performance, increase in net income and notable return on equity. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 14.8%. Since the same quarter one year prior, revenues slightly increased by 7.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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.
  • 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. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen 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 43.3% when compared to the same quarter one year prior, rising from $63.30 million to $90.70 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Insurance industry and the overall market on the basis of return on equity, OLD REPUBLIC INTL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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