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."

GlaxoSmithKline

Dividend Yield: 6.70%

GlaxoSmithKline

(NYSE:

GSK

) shares currently have a dividend yield of 6.70%.

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 14.00.

The average volume for GlaxoSmithKline has been 3,943,100 shares per day over the past 30 days. GlaxoSmithKline has a market cap of $106.7 billion and is part of the drugs industry. Shares are down 2.4% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

GlaxoSmithKline

as a

hold

. The company's strengths can be seen in multiple areas, such as its notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and weak operating cash flow.

Highlights from the ratings report include:

  • 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.
  • GLAXOSMITHKLINE PLC 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, GLAXOSMITHKLINE PLC increased its bottom line by earning $5.11 versus $1.77 in the prior year. This year, the market expects an improvement in earnings ($88.14 versus $5.11).
  • GSK, with its decline in revenue, underperformed when compared the industry average of 2.5%. Since the same quarter one year prior, revenues fell by 18.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The debt-to-equity ratio is very high at 3.25 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, GSK maintains a poor quick ratio of 0.87, which illustrates the inability to avoid short-term cash problems.
  • 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 Pharmaceuticals industry. The net income has significantly decreased by 156.5% when compared to the same quarter one year ago, falling from $1,498.59 million to -$846.72 million.

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HP

Dividend Yield: 5.30%

HP

(NYSE:

HPQ

) shares currently have a dividend yield of 5.30%.

HP Inc. provides products, technologies, software, solutions, and services to individual consumers and small- and medium-sized businesses (SMBs), as well as to the government, health, and education sectors worldwide. It operates through Personal Systems and Printing segments. The company has a P/E ratio of 3.64.

The average volume for HP has been 20,452,900 shares per day over the past 30 days. HP has a market cap of $16.9 billion and is part of the computer hardware industry. Shares are down 20.4% year-to-date as of the close of trading on Friday.

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Lexington Realty

Dividend Yield: 7.90%

Lexington Realty

(NYSE:

LXP

) shares currently have a dividend yield of 7.90%.

Lexington Corporate Properties Trust operates as a self-managed and self-administered real estate investment trust (REIT). The company acquires, owns, and manages a portfolio of office, industrial, and retail properties net-leased to corporate tenants in the United States. The company has a P/E ratio of 19.84.

The average volume for Lexington Realty has been 1,379,100 shares per day over the past 30 days. Lexington Realty has a market cap of $2.0 billion and is part of the real estate industry. Shares are up 5.1% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Lexington Realty

as a

hold

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

Highlights from the ratings report include:

  • 45.81% is the gross profit margin for LEXINGTON REALTY TRUST which we consider to be strong. It has increased significantly from the same period last year. Along with this, the net profit margin of 32.43% is above that of the industry average.
  • LEXINGTON REALTY TRUST reported significant earnings per share improvement 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, LEXINGTON REALTY TRUST increased its bottom line by earning $0.44 versus $0.17 in the prior year. For the next year, the market is expecting a contraction of 13.6% in earnings ($0.38 versus $0.44).
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Real Estate Investment Trusts (REITs) industry average. The net income has decreased by 6.7% when compared to the same quarter one year ago, dropping from $37.36 million to $34.85 million.
  • LXP has underperformed the S&P 500 Index, declining 12.44% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

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