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."

National Health Investors

Dividend Yield: 5.50%

National Health Investors

(NYSE:

NHI

) shares currently have a dividend yield of 5.50%.

National Health Investors Inc. is a real estate investment trust. It invests in the real estate markets of United States. The firm invests in the health care properties primarily in the long-term care and senior housing industries. The company has a P/E ratio of 18.70.

The average volume for National Health Investors has been 238,700 shares per day over the past 30 days. National Health Investors has a market cap of $2.3 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

National Health Investors

as a

buy

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

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 6.1%. Since the same quarter one year prior, revenues rose by 30.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • NATIONAL HEALTH INVESTORS has improved earnings per share by 17.1% 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. We feel that this trend should continue. During the past fiscal year, NATIONAL HEALTH INVESTORS increased its bottom line by earning $3.03 versus $2.76 in the prior year. This year, the market expects an improvement in earnings ($3.35 versus $3.03).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 33.0% when compared to the same quarter one year prior, rising from $25.25 million to $33.60 million.
  • Net operating cash flow has increased to $40.80 million or 29.13% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 9.44%.
  • The gross profit margin for NATIONAL HEALTH INVESTORS is currently very high, coming in at 76.57%. Regardless of NHI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NHI's net profit margin of 57.90% significantly outperformed against the industry.

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Realty Income

Dividend Yield: 4.40%

Realty Income

(NYSE:

O

) shares currently have a dividend yield of 4.40%.

Realty Income Corporation is a publicly traded real estate investment trust. It invests in the real estate markets of the United States. The firm makes investments in commercial real estate. Realty Income Corporation was founded in 1969 and is based in Escondido, California. The company has a P/E ratio of 47.87.

The average volume for Realty Income has been 2,207,900 shares per day over the past 30 days. Realty Income has a market cap of $13.0 billion and is part of the real estate industry. Shares are up 8.8% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Realty Income

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, solid stock price performance 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:

  • O's revenue growth has slightly outpaced the industry average of 6.1%. Since the same quarter one year prior, revenues slightly increased by 9.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • REALTY INCOME CORP reported flat earnings per share in the most recent quarter. 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, REALTY INCOME CORP increased its bottom line by earning $1.02 versus $0.71 in the prior year. This year, the market expects an improvement in earnings ($1.04 versus $1.02).
  • Net operating cash flow has slightly increased to $151.24 million or 7.02% when compared to the same quarter last year. Despite an increase in cash flow, REALTY INCOME CORP's average is still marginally south of the industry average growth rate of 9.44%.
  • The gross profit margin for REALTY INCOME CORP is rather high; currently it is at 52.97%. Regardless of O's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 26.06% trails the industry average.
  • Compared to where it was trading a year ago, O'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. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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Aircastle

Dividend Yield: 4.50%

Aircastle

(NYSE:

AYR

) shares currently have a dividend yield of 4.50%.

Aircastle Limited acquires, leases, and sells commercial jet aircraft to airlines worldwide. The company also makes investments in various aviation assets, such as debt investments secured by commercial jet aircraft. The company has a P/E ratio of 12.03.

The average volume for Aircastle has been 466,300 shares per day over the past 30 days. Aircastle has a market cap of $1.7 billion and is part of the diversified services industry. Shares are down 1.7% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Aircastle

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, solid stock price performance 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:

  • The revenue growth came in higher than the industry average of 2.5%. Since the same quarter one year prior, revenues rose by 16.2%. 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.
  • Net operating cash flow has slightly increased to $158.86 million or 4.53% when compared to the same quarter last year. In addition, AIRCASTLE LTD has also modestly surpassed the industry average cash flow growth rate of 2.02%.
  • The gross profit margin for AIRCASTLE LTD is currently very high, coming in at 91.87%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -6.87% is in-line with the industry average.
  • After a year of stock price fluctuations, the net result is that AYR'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. 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.
  • AIRCASTLE LTD 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, AIRCASTLE LTD increased its bottom line by earning $1.25 versus $0.47 in the prior year. This year, the market expects an improvement in earnings ($1.57 versus $1.25).

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