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."

Consolidated Edison

Dividend Yield: 4.10%

Consolidated Edison

(NYSE:

ED

) shares currently have a dividend yield of 4.10%.

Consolidated Edison, Inc., through its subsidiaries, engages in regulated electric, gas, and steam delivery businesses in the United States. The company has a P/E ratio of 16.87.

The average volume for Consolidated Edison has been 2,109,100 shares per day over the past 30 days. Consolidated Edison has a market cap of $18.4 billion and is part of the utilities industry. Shares are down 5.3% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Consolidated Edison

as a

buy

. The company's strengths can be seen in multiple areas, such as its increase in net income, reasonable valuation levels, growth in earnings per share and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

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 Multi-Utilities industry average. The net income increased by 2.8% when compared to the same quarter one year prior, going from $213.00 million to $219.00 million.
  • CONSOLIDATED EDISON INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, CONSOLIDATED EDISON INC increased its bottom line by earning $3.71 versus $3.61 in the prior year. This year, the market expects an improvement in earnings ($4.00 versus $3.71).
  • After a year of stock price fluctuations, the net result is that ED'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.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 8.3%. Since the same quarter one year prior, revenues slightly dropped by 4.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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GlaxoSmithKline

Dividend Yield: 5.70%

GlaxoSmithKline

(NYSE:

GSK

) shares currently have a dividend yield of 5.70%.

GlaxoSmithKline plc creates, discovers, develops, manufactures, and markets pharmaceutical products, including vaccines, over-the-counter medicines, and health-related consumer products worldwide. The company has a P/E ratio of 14.08.

The average volume for GlaxoSmithKline has been 3,909,700 shares per day over the past 30 days. GlaxoSmithKline has a market cap of $99.1 billion and is part of the drugs industry. Shares are down 6.3% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

GlaxoSmithKline

as a

buy

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

Highlights from the ratings report include:

  • GSK's revenue growth has slightly outpaced the industry average of 7.1%. Since the same quarter one year prior, revenues slightly increased by 2.7%. 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 company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, GLAXOSMITHKLINE PLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for GLAXOSMITHKLINE PLC is rather high; currently it is at 62.96%. Regardless of GSK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GSK's net profit margin of 3.93% is significantly lower than the industry average.
  • GLAXOSMITHKLINE PLC's earnings per share declined by 38.1% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, GLAXOSMITHKLINE PLC reported lower earnings of $1.77 versus $3.68 in the prior year. This year, the market expects an improvement in earnings ($78.52 versus $1.77).
  • The share price of GLAXOSMITHKLINE PLC has not done very well: it is down 6.34% 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, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

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Buckeye Partners

Dividend Yield: 7.00%

Buckeye Partners

(NYSE:

BPL

) shares currently have a dividend yield of 7.00%.

Buckeye Partners, L.P. owns and operates liquid petroleum products pipeline systems in the United States. The company operates through four segments: Pipelines & Terminals, Global Marine Terminals, Merchant Services, and Development & Logistics. The company has a P/E ratio of 23.35.

The average volume for Buckeye Partners has been 549,800 shares per day over the past 30 days. Buckeye Partners has a market cap of $8.6 billion and is part of the energy industry. Shares are down 13.6% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Buckeye Partners

as a

buy

. Among the primary strengths of the company is its expanding profit margins over time. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • BUCKEYE PARTNERS LP's earnings per share declined by 12.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, BUCKEYE PARTNERS LP reported lower earnings of $2.79 versus $3.23 in the prior year. This year, the market expects an improvement in earnings ($3.44 versus $2.79).
  • Along with the very weak revenue results, BPL underperformed when compared to the industry average of 37.2%. Since the same quarter one year prior, revenues plummeted by 53.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for BUCKEYE PARTNERS LP is currently lower than what is desirable, coming in at 30.24%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, BPL's net profit margin of 13.73% significantly outperformed against the industry.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 2.8% when compared to the same quarter one year ago, dropping from $102.94 million to $100.04 million.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, BPL has underperformed the S&P 500 Index, declining 13.52% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

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