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 "Buy."

Western Gas Partners

Dividend Yield: 5.50%

Western Gas Partners (NYSE: WES) shares currently have a dividend yield of 5.50%.

Western Gas Partners, LP owns, operates, acquires, and develops midstream energy assets in the Rocky Mountains, the Mid-Continent, North-central Pennsylvania, and Texas. The company has a P/E ratio of 32.17.

The average volume for Western Gas Partners has been 318,700 shares per day over the past 30 days. Western Gas Partners has a market cap of $7.1 billion and is part of the energy industry. Shares are down 25.6% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Western Gas Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 38.8%. Since the same quarter one year prior, revenues rose by 27.7%. 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.
  • Net operating cash flow has increased to $156.04 million or 25.78% when compared to the same quarter last year. In addition, WESTERN GAS PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -53.49%.
  • 45.99% is the gross profit margin for WESTERN GAS PARTNERS LP which we consider to be strong. Regardless of WES's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WES's net profit margin of 22.27% significantly outperformed against the industry.
  • The debt-to-equity ratio is somewhat low, currently at 0.69, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.84 is somewhat weak and could be cause for future problems.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 8.2% when compared to the same quarter one year ago, dropping from $91.06 million to $83.57 million.

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American Campus Communities

Dividend Yield: 4.40%

American Campus Communities (NYSE: ACC) shares currently have a dividend yield of 4.40%.

American Campus Communities, Inc. is an independent equity real estate investment trust. The firm invests in the real estate markets of the United States. It primarily engages in developing, owning, and managing high-quality student housing communities. The company has a P/E ratio of 38.56.

The average volume for American Campus Communities has been 929,100 shares per day over the past 30 days. American Campus Communities has a market cap of $4.1 billion and is part of the real estate industry. Shares are down 11.2% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates American Campus Communities as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, revenue growth, reasonable valuation levels, notable return on equity and increase in net income. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • AMERICAN CAMPUS COMMUNITIES has improved earnings per share by 16.7% 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 year. We feel that this trend should continue. During the past fiscal year, AMERICAN CAMPUS COMMUNITIES increased its bottom line by earning $0.55 versus $0.43 in the prior year. This year, the market expects an improvement in earnings ($0.58 versus $0.55).
  • 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 3.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN CAMPUS COMMUNITIES's return on equity is below that of both the industry average and the S&P 500.
  • The company, on the basis of net income growth 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 increased by 15.9% when compared to the same quarter one year prior, going from $13.44 million to $15.58 million.

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TECO Energy

Dividend Yield: 4.10%

TECO Energy (NYSE: TE) shares currently have a dividend yield of 4.10%.

TECO Energy, Inc., an electric and gas utility holding company, engages in the regulated electric and gas utility operations. The company has a P/E ratio of 22.53.

The average volume for TECO Energy has been 2,408,400 shares per day over the past 30 days. TECO Energy has a market cap of $5.1 billion and is part of the utilities industry. Shares are up 7% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates TECO Energy as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and solid stock price performance. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 9.9%. Since the same quarter one year prior, revenues rose by 11.9%. 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 net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Multi-Utilities industry average. The net income increased by 5.3% when compared to the same quarter one year prior, going from $58.40 million to $61.50 million.
  • TECO ENERGY INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, TECO ENERGY INC increased its bottom line by earning $0.92 versus $0.88 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus $0.92).
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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