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."

RR Donnelley & Sons

Dividend Yield: 6.90%

RR Donnelley & Sons (NASDAQ: RRD) shares currently have a dividend yield of 6.90%.

R.R. Donnelley & Sons Company provides integrated communications solutions to private and public sector clients in the United States and internationally. The company operates through Publishing and Retail Services, Variable Print, Strategic Services, and International segments. The company has a P/E ratio of 20.75.

The average volume for RR Donnelley & Sons has been 1,741,300 shares per day over the past 30 days. RR Donnelley & Sons has a market cap of $3.2 billion and is part of the diversified services industry. Shares are down 11.5% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates RR Donnelley & Sons as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity and good cash flow from operations. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • 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 Commercial Services & Supplies industry and the overall market, DONNELLEY (R R) & SONS CO's return on equity exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $205.30 million or 36.77% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 16.94%.
  • DONNELLEY (R R) & SONS CO's earnings per share declined by 34.4% 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, DONNELLEY (R R) & SONS CO reported lower earnings of $0.58 versus $1.15 in the prior year. This year, the market expects an improvement in earnings ($1.54 versus $0.58).
  • RRD, with its decline in revenue, slightly underperformed the industry average of 5.2%. Since the same quarter one year prior, revenues slightly dropped by 5.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Commercial Services & Supplies industry average, but is less than that of the S&P 500. The net income has significantly decreased by 32.8% when compared to the same quarter one year ago, falling from $64.70 million to $43.50 million.

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Consolidated Edison

Dividend Yield: 4.10%

Consolidated Edison (NYSE: ED) shares currently have a dividend yield of 4.10%.

Consolidated Edison, Inc., through its subsidiaries, engages in regulated electric, gas, and steam delivery businesses in the United States. The company has a P/E ratio of 16.81.

The average volume for Consolidated Edison has been 2,388,600 shares per day over the past 30 days. Consolidated Edison has a market cap of $18.6 billion and is part of the utilities industry. Shares are down 5.8% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Consolidated Edison as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share 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 stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. 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.
  • CONSOLIDATED EDISON INC's earnings per share improvement from the most recent quarter was slightly positive. 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, CONSOLIDATED EDISON INC increased its bottom line by earning $3.71 versus $3.61 in the prior year. This year, the market expects an improvement in earnings ($4.00 versus $3.71).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Multi-Utilities industry average. The net income increased by 2.8% when compared to the same quarter one year prior, going from $213.00 million to $219.00 million.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.4%. Since the same quarter one year prior, revenues slightly dropped by 4.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for CONSOLIDATED EDISON INC is currently lower than what is desirable, coming in at 26.83%. Regardless of ED'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 7.85% trails the industry average.

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Ship Finance International

Dividend Yield: 11.90%

Ship Finance International (NYSE: SFL) shares currently have a dividend yield of 11.90%.

Ship Finance International Limited owns and operates vessels and offshore related assets in Bermuda, Cyprus, Malta, Liberia, Norway, Singapore, the United Kingdom, and the Marshall Islands. It is also involved in the charter, purchase, and sale of assets. The company has a P/E ratio of 14.58.

The average volume for Ship Finance International has been 618,600 shares per day over the past 30 days. Ship Finance International has a market cap of $1.3 billion and is part of the transportation industry. Shares are up 5.5% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Ship Finance International as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations and notable return on equity. 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 34.6%. Since the same quarter one year prior, revenues slightly increased by 9.0%. 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 gross profit margin for SHIP FINANCE INTL LTD is rather high; currently it is at 69.52%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 36.75% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 76.97% to $65.59 million when compared to the same quarter last year. In addition, SHIP FINANCE INTL LTD has also vastly surpassed the industry average cash flow growth rate of -20.54%.
  • SHIP FINANCE INTL LTD's earnings per share declined by 20.0% 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, SHIP FINANCE INTL LTD increased its bottom line by earning $1.25 versus $1.01 in the prior year. This year, the market expects an improvement in earnings ($2.27 versus $1.25).
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 18.7% when compared to the same quarter one year ago, dropping from $40.73 million to $33.11 million.

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