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."

Sunoco Logistics Partners

Dividend Yield: 7.80%

Sunoco Logistics Partners

(NYSE:

SXL

) shares currently have a dividend yield of 7.80%.

Sunoco Logistics Partners L.P. transports, terminals, and stores crude oil, refined products, and natural gas liquids (NGLs). The company has a P/E ratio of 62.07.

The average volume for Sunoco Logistics Partners has been 1,934,700 shares per day over the past 30 days. Sunoco Logistics Partners has a market cap of $6.9 billion and is part of the energy industry. Shares are down 3.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Sunoco Logistics Partners

as a

hold

. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, growth in earnings per share and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 119.7% when compared to the same quarter one year prior, rising from -$127.00 million to $25.00 million.
  • SUNOCO LOGISTICS PARTNERS LP reported significant earnings per share improvement in the most recent quarter compared to 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, SUNOCO LOGISTICS PARTNERS LP reported lower earnings of $0.45 versus $0.56 in the prior year. This year, the market expects an improvement in earnings ($1.09 versus $0.45).
  • The gross profit margin for SUNOCO LOGISTICS PARTNERS LP is currently extremely low, coming in at 8.42%. Regardless of SXL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SXL's net profit margin of 1.08% compares favorably to the industry average.
  • SXL'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 36.62%, 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. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, SXL is still more expensive than most of the other companies in its industry.

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Alon USA Energy

Dividend Yield: 5.40%

Alon USA Energy

(NYSE:

ALJ

) shares currently have a dividend yield of 5.40%.

Alon USA Energy, Inc. refines and markets petroleum products, primarily in the South Central, Southwestern, and Western regions of the United States. It operates in three segments: Refining and Marketing, Asphalt, and Retail. The company has a P/E ratio of 14.27.

The average volume for Alon USA Energy has been 919,200 shares per day over the past 30 days. Alon USA Energy has a market cap of $787.5 million and is part of the energy industry. Shares are down 23.9% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Alon USA Energy

as a

hold

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

Highlights from the ratings report include:

  • Net operating cash flow has slightly increased to $49.76 million or 1.38% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -39.34%.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ALON USA ENERGY INC's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.31%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 850.00% compared to the year-earlier quarter. 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.
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 883.3% when compared to the same quarter one year ago, falling from $6.71 million to -$52.53 million.

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Caterpillar

Dividend Yield: 4.10%

Caterpillar

(NYSE:

CAT

) shares currently have a dividend yield of 4.10%.

Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. The company has a P/E ratio of 15.62.

The average volume for Caterpillar has been 7,342,300 shares per day over the past 30 days. Caterpillar has a market cap of $44.2 billion and is part of the industrial industry. Shares are up 11.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Caterpillar

as a

hold

. The company's strongest point has been its expanding profit margins. At the same time, however, we also find weaknesses including deteriorating net income, generally higher debt management risk and weak operating cash flow.

Highlights from the ratings report include:

  • CAT, with its decline in revenue, slightly underperformed the industry average of 20.1%. Since the same quarter one year prior, revenues fell by 22.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • CATERPILLAR 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, CATERPILLAR INC reported lower earnings of $3.44 versus $5.87 in the prior year. This year, the market expects an improvement in earnings ($3.71 versus $3.44).
  • The gross profit margin for CATERPILLAR INC is currently lower than what is desirable, coming in at 33.26%. Regardless of CAT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.78% trails 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 Machinery industry. The net income has significantly decreased by 111.5% when compared to the same quarter one year ago, falling from $757.00 million to -$87.00 million.
  • The debt-to-equity ratio is very high at 2.57 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, CAT maintains a poor quick ratio of 0.87, which illustrates the inability to avoid short-term cash problems.

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