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."

Education Realty

Dividend Yield: 4.90%

Education Realty (NYSE: EDR) shares currently have a dividend yield of 4.90%.

EdR is a real estate investment trust. The firm invests in the real estate markets of United States. It invests collegiate housing communities. The firm develops, acquires, owns, and manages collegiate housing communities located near university campuses. The company has a P/E ratio of 25.07.

The average volume for Education Realty has been 306,800 shares per day over the past 30 days. Education Realty has a market cap of $1.5 billion and is part of the real estate industry. Shares are down 17% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Education Realty as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • EDR's revenue growth has slightly outpaced the industry average of 6.6%. Since the same quarter one year prior, revenues rose by 14.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • EDUCATION REALTY TRUST INC 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, EDUCATION REALTY TRUST INC increased its bottom line by earning $0.98 versus $0.15 in the prior year. For the next year, the market is expecting a contraction of 65.3% in earnings ($0.34 versus $0.98).
  • In its most recent trading session, EDR has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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 gross profit margin for EDUCATION REALTY TRUST INC is rather low; currently it is at 15.40%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, EDR's net profit margin of 5.10% is significantly lower than the industry average.

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MFA Financial

Dividend Yield: 10.70%

MFA Financial (NYSE: MFA) shares currently have a dividend yield of 10.70%.

MFA Financial, Inc., a real estate investment trust (REIT), invests in residential agency and non-agency mortgage-backed securities (MBS), and residential whole loans in the United States (the U.S.). The company has a P/E ratio of 9.22.

The average volume for MFA Financial has been 2,136,300 shares per day over the past 30 days. MFA Financial has a market cap of $2.8 billion and is part of the real estate industry. Shares are down 7.3% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates MFA Financial as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and expanding profit margins. 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 feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.7%. Since the same quarter one year prior, revenues slightly increased by 4.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • The gross profit margin for MFA FINANCIAL INC is currently very high, coming in at 89.94%. Regardless of MFA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MFA's net profit margin of 59.31% significantly outperformed against the industry.
  • MFA has underperformed the S&P 500 Index, declining 8.44% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income has decreased by 0.8% when compared to the same quarter one year ago, dropping from $78.73 million to $78.07 million.

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Washington REIT

Dividend Yield: 4.50%

Washington REIT (NYSE: WRE) shares currently have a dividend yield of 4.50%.

Washington Real Estate Investment Trust is an equity real estate investment trust (REIT). The company engages in the ownership, operation, and development of real properties. The firm invests in real estate markets of the greater Washington D.C. metro region. The company has a P/E ratio of 55.27.

The average volume for Washington REIT has been 546,100 shares per day over the past 30 days. Washington REIT has a market cap of $1.8 billion and is part of the real estate industry. Shares are down 4.3% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Washington REIT as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth 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, deteriorating net income and poor profit margins.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.6%. 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.
  • WASHINGTON REIT 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, WASHINGTON REIT increased its bottom line by earning $0.06 versus $0.00 in the prior year. This year, the market expects an improvement in earnings ($0.50 versus $0.06).
  • 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 334.2% when compared to the same quarter one year ago, falling from $1.09 million to -$2.55 million.
  • In its most recent trading session, WRE has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

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