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."

Atwood Oceanics

Dividend Yield: 4.90%

Atwood Oceanics

(NYSE:

ATW

) shares currently have a dividend yield of 4.90%.

Atwood Oceanics, Inc., an offshore drilling contractor, engages in the drilling and completion of exploratory and developmental oil and gas wells worldwide. The company has a P/E ratio of 0.91.

The average volume for Atwood Oceanics has been 3,984,000 shares per day over the past 30 days. Atwood Oceanics has a market cap of $393.1 million and is part of the energy industry. Shares are down 44.9% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Atwood Oceanics

as a

hold

. 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 and notable return on equity. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 32.7%. Since the same quarter one year prior, revenues rose by 12.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.57, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 3.21, which clearly demonstrates the ability to cover short-term cash needs.
  • ATWOOD OCEANICS has improved earnings per share by 34.9% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ATWOOD OCEANICS increased its bottom line by earning $6.65 versus $5.24 in the prior year. For the next year, the market is expecting a contraction of 42.1% in earnings ($3.85 versus $6.65).
  • ATW'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 78.24%, 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. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

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Ventas

Dividend Yield: 5.30%

Ventas

(NYSE:

VTR

) shares currently have a dividend yield of 5.30%.

Ventas, Inc. is a publicly owned real estate investment trust. The firm engages in investment, management, financing, and leasing of properties in the healthcare industry. It invests in the real estate markets of the United States and Canada. The company has a P/E ratio of 38.01.

The average volume for Ventas has been 2,814,500 shares per day over the past 30 days. Ventas has a market cap of $18.5 billion and is part of the real estate industry. Shares are down 2.6% year-to-date as of the close of trading on Monday.

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TheStreet Recommends

TheStreet Ratings rates

Ventas

as a

hold

. Among the primary strengths of the company is its revenue growth. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

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 17.3%. 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.
  • VENTAS 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. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, VENTAS INC reported lower earnings of $1.27 versus $1.66 in the prior year. This year, the market expects an improvement in earnings ($1.44 versus $1.27).
  • 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 79.1% when compared to the same quarter one year ago, falling from $109.13 million to $22.85 million.
  • The gross profit margin for VENTAS INC is currently lower than what is desirable, coming in at 29.77%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.76% significantly trails the industry average.
  • Net operating cash flow has declined marginally to $304.32 million or 6.15% 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.

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Diamondrock Hospitality

Dividend Yield: 6.10%

Diamondrock Hospitality

(NYSE:

DRH

) shares currently have a dividend yield of 6.10%.

DiamondRock Hospitality Company, a lodging focused real estate company, owns premium hotels and resorts in North America. The company has a P/E ratio of 13.15.

The average volume for Diamondrock Hospitality has been 2,358,700 shares per day over the past 30 days. Diamondrock Hospitality has a market cap of $1.6 billion and is part of the real estate industry. Shares are down 18.4% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates

Diamondrock Hospitality

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.1%. Since the same quarter one year prior, revenues slightly increased by 3.9%. 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 DIAMONDROCK HOSPITALITY CO is rather low; currently it is at 20.11%. Regardless of DRH's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, DRH's net profit margin of 10.25% is significantly lower than the industry average.
  • 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 44.1% when compared to the same quarter one year ago, falling from $43.81 million to $24.46 million.

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