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."

Old Republic International Corporation

Dividend Yield: 4.40%

Old Republic International Corporation (NYSE: ORI) shares currently have a dividend yield of 4.40%.

Old Republic International Corporation, through its subsidiaries, engages in the insurance underwriting and related services business primarily in the United States and Canada. The company has a P/E ratio of 13.04.

The average volume for Old Republic International Corporation has been 1,128,900 shares per day over the past 30 days. Old Republic International Corporation has a market cap of $4.4 billion and is part of the insurance industry. Shares are up 8.5% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Old Republic International Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, solid stock price performance and increase in net income. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 14.9%. Since the same quarter one year prior, revenues slightly increased by 5.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although ORI's debt-to-equity ratio of 0.24 is very low, it is currently higher than that of the industry average.
  • 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. Although other factors naturally played a role, the company's strong earnings growth was key. 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.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 54.5% when compared to the same quarter one year prior, rising from $66.10 million to $102.10 million.
  • Net operating cash flow has significantly increased by 204.86% to $112.80 million when compared to the same quarter last year. In addition, OLD REPUBLIC INTL CORP has also vastly surpassed the industry average cash flow growth rate of -46.73%.

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Duke Energy Corporation

Dividend Yield: 4.30%

Duke Energy Corporation (NYSE: DUK) shares currently have a dividend yield of 4.30%.

Duke Energy Corporation, together with its subsidiaries, operates as an energy company in the United States and Latin America. It operates through three segments: Regulated Utilities, International Energy, and Commercial Power. The company has a P/E ratio of 22.92.

The average volume for Duke Energy Corporation has been 3,509,300 shares per day over the past 30 days. Duke Energy Corporation has a market cap of $53.1 billion and is part of the utilities industry. Shares are down 8.2% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Duke Energy Corporation as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • Net operating cash flow has increased to $1,439.00 million or 15.48% when compared to the same quarter last year. Despite an increase in cash flow, DUKE ENERGY CORP's average is still marginally south of the industry average growth rate of 23.63%.
  • 36.82% is the gross profit margin for DUKE ENERGY CORP which we consider to be strong. Regardless of DUK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.71% trails the industry average.
  • DUKE ENERGY CORP's earnings per share declined by 14.7% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, DUKE ENERGY CORP reported lower earnings of $3.46 versus $3.63 in the prior year. This year, the market expects an improvement in earnings ($4.65 versus $3.46).
  • DUK, with its decline in revenue, slightly underperformed the industry average of 2.0%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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GEO Group

Dividend Yield: 7.70%

GEO Group (NYSE: GEO) shares currently have a dividend yield of 7.70%.

The GEO Group, Inc. provides government-outsourced services specializing in the management of correctional, detention, and re-entry facilities, and the provision of community based services and youth services in the United States, Australia, South Africa, the United Kingdom, and Canada. The company has a P/E ratio of 17.47.

The average volume for GEO Group has been 544,700 shares per day over the past 30 days. GEO Group has a market cap of $2.4 billion and is part of the real estate industry. Shares are down 22.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates GEO Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels 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:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.7%. Since the same quarter one year prior, revenues slightly increased by 8.0%. 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 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, GEO GROUP INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • GEO GROUP INC's earnings per share declined by 29.6% in the most recent quarter compared to 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, GEO GROUP INC increased its bottom line by earning $1.99 versus $1.64 in the prior year. For the next year, the market is expecting a contraction of 3.0% in earnings ($1.93 versus $1.99).
  • The share price of GEO GROUP INC has not done very well: it is down 15.32% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

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