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."

Coach

Dividend Yield: 4.70%

Coach

(NYSE:

COH

) shares currently have a dividend yield of 4.70%.

Coach, Inc. provides luxury accessories and lifestyle collections in the United States. The company has a P/E ratio of 19.81.

The average volume for Coach has been 4,380,200 shares per day over the past 30 days. Coach has a market cap of $7.9 billion and is part of the consumer non-durables industry. Shares are down 24.2% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Coach

as a

hold

. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:

  • The gross profit margin for COACH INC is currently very high, coming in at 74.39%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, COH's net profit margin of 1.16% significantly trails the industry average.
  • Despite currently having a low debt-to-equity ratio of 0.36, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that COH's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.09 is high and demonstrates strong liquidity.
  • Net operating cash flow has decreased to $186.60 million or 40.96% when compared to the same quarter last year. Despite a decrease in cash flow COACH INC is still fairing well by exceeding its industry average cash flow growth rate of -72.49%.
  • 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 Textiles, Apparel & Luxury Goods industry. The net income has significantly decreased by 84.5% when compared to the same quarter one year ago, falling from $75.28 million to $11.70 million.

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Lexmark International

Dividend Yield: 5.00%

Lexmark International

(NYSE:

LXK

) shares currently have a dividend yield of 5.00%.

Lexmark International, Inc., together with its subsidiaries, operates as a developer, manufacturer, and supplier of printing, imaging, device management, managed print services (MPS), document workflow, and business process and content management solutions worldwide.

The average volume for Lexmark International has been 956,700 shares per day over the past 30 days. Lexmark International has a market cap of $1.8 billion and is part of the computer hardware industry. Shares are down 30.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Lexmark International

as a

hold

. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:

  • 48.89% is the gross profit margin for LEXMARK INTL INC which we consider to be strong. 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 -4.06% is in-line with the industry average.
  • The revenue fell significantly faster than the industry average of 36.6%. Since the same quarter one year prior, revenues slightly dropped by 0.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • LEXMARK INTL 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 two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, LEXMARK INTL INC reported lower earnings of $1.23 versus $4.10 in the prior year. This year, the market expects an improvement in earnings ($3.56 versus $1.23).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Computers & Peripherals industry and the overall market, LEXMARK INTL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • 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 196.5% when compared to the same quarter one year ago, falling from $37.50 million to -$36.20 million.

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CenterPoint Energy

Dividend Yield: 5.60%

CenterPoint Energy

(NYSE:

CNP

) shares currently have a dividend yield of 5.60%.

CenterPoint Energy, Inc. operates as a public utility holding company in the United States. The company has a P/E ratio of 14.61.

The average volume for CenterPoint Energy has been 3,832,700 shares per day over the past 30 days. CenterPoint Energy has a market cap of $7.7 billion and is part of the utilities industry. Shares are down 23.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

CenterPoint Energy

as a

hold

. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:

  • Net operating cash flow has increased to $456.00 million or 37.34% when compared to the same quarter last year. Despite an increase in cash flow, CENTERPOINT ENERGY INC's average is still marginally south of the industry average growth rate of 41.60%.
  • CNP, with its decline in revenue, underperformed when compared the industry average of 7.5%. Since the same quarter one year prior, revenues fell by 18.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Multi-Utilities industry average. The net income has significantly decreased by 28.0% when compared to the same quarter one year ago, falling from $107.00 million to $77.00 million.
  • Currently the debt-to-equity ratio of 1.88 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, CNP has a quick ratio of 0.59, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

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