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."

Dupont Fabros Technology

Dividend Yield: 5.60%

Dupont Fabros Technology (NYSE: DFT) shares currently have a dividend yield of 5.60%.

DuPont Fabros Technology, Inc., a real estate investment trust (REIT), engages in the ownership, acquisition, development, operation, management, and lease of large-scale data center facilities in the United States. The company has a P/E ratio of 27.60.

The average volume for Dupont Fabros Technology has been 549,300 shares per day over the past 30 days. Dupont Fabros Technology has a market cap of $1.9 billion and is part of the real estate industry. Shares are down 10.7% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Dupont Fabros Technology as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, increase in stock price during the past year, good cash flow from operations and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • DFT's revenue growth has slightly outpaced the industry average of 9.8%. Since the same quarter one year prior, revenues rose by 11.6%. 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 slightly increased to $78.39 million or 5.74% when compared to the same quarter last year. Despite an increase in cash flow, DUPONT FABROS TECHNOLOGY INC's average is still marginally south of the industry average growth rate of 12.34%.
  • After a year of stock price fluctuations, the net result is that DFT's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. 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.
  • 35.95% is the gross profit margin for DUPONT FABROS TECHNOLOGY INC which we consider to be strong. Regardless of DFT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DFT's net profit margin of 23.25% is significantly lower than the industry average.

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Targa Resources

Dividend Yield: 4.60%

Targa Resources (NYSE: TRGP) shares currently have a dividend yield of 4.60%.

Targa Resources Corp., through its general and limited partner interests in Targa Resources Partners LP, provides midstream natural gas and natural gas liquid (NGL) services in the United States. The company operates in two divisions, Gathering and Processing, and Logistics and Marketing. The company has a P/E ratio of 36.92.

The average volume for Targa Resources has been 719,600 shares per day over the past 30 days. Targa Resources has a market cap of $4.2 billion and is part of the energy industry. Shares are down 29.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Targa Resources as a buy. The company's strongest point has been its expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • Despite the weak revenue results, TRGP has outperformed against the industry average of 34.4%. Since the same quarter one year prior, revenues fell by 12.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • TARGA RESOURCES CORP 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, TARGA RESOURCES CORP increased its bottom line by earning $2.44 versus $1.55 in the prior year. For the next year, the market is expecting a contraction of 25.0% in earnings ($1.83 versus $2.44).
  • The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 42.4% when compared to the same quarter one year ago, falling from $26.40 million to $15.20 million.
  • The gross profit margin for TARGA RESOURCES CORP is currently extremely low, coming in at 6.61%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.89% trails that of the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 44.26%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 57.14% compared to the year-earlier quarter. Although its share price is down sharply from a year ago and the fact that TRGP is still more expensive than most of the other companies in its industry based on its current price-to-earnings ratio, we believe that other strengths that the company offers support our buy rating.

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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 23.06.

The average volume for TECO Energy has been 2,300,600 shares per day over the past 30 days. TECO Energy has a market cap of $5.2 billion and is part of the utilities industry. Shares are up 7.4% year-to-date as of the close of trading on Tuesday.

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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, good cash flow from operations, solid stock price performance and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.4%. Since the same quarter one year prior, revenues rose by 12.4%. 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 significantly increased by 102.15% to $149.80 million when compared to the same quarter last year. In addition, TECO ENERGY INC has also vastly surpassed the industry average cash flow growth rate of 42.19%.
  • 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).
  • Compared to its closing price of one year ago, TE's share price has jumped by 28.67%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • 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 Multi-Utilities industry and the overall market, TECO ENERGY INC's return on equity is below that of both the industry average and the S&P 500.

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