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: 5.30%

Western Gas Partners (NYSE: WES) shares currently have a dividend yield of 5.30%.

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 32.92.

The average volume for Western Gas Partners has been 374,800 shares per day over the past 30 days. Western Gas Partners has a market cap of $7.2 billion and is part of the energy industry. Shares are down 22.9% year-to-date as of the close of trading on Friday.

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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, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, good cash flow from operations and increase in net income. 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 34.5%. Since the same quarter one year prior, revenues rose by 16.4%. 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.72, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.23, which illustrates the ability to avoid short-term cash problems.
  • 47.34% is the gross profit margin for WESTERN GAS PARTNERS LP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.46% significantly outperformed against the industry average.
  • Net operating cash flow has slightly increased to $145.43 million or 3.76% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -20.76%.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 11.4% when compared to the same quarter one year prior, going from $99.17 million to $110.52 million.

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Retail Opportunity Investments

Dividend Yield: 4.40%

Retail Opportunity Investments (NASDAQ: ROIC) shares currently have a dividend yield of 4.40%.

Retail Opportunity Investments Corp., a real estate investment trust (REIT), engages in the acquisition, ownership, and management of necessity-based community and neighborhood shopping centers in the eastern and western regions of the United States. The company has a P/E ratio of 70.68.

The average volume for Retail Opportunity Investments has been 640,700 shares per day over the past 30 days. Retail Opportunity Investments has a market cap of $1.5 billion and is part of the real estate industry. Shares are down 7.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Retail Opportunity Investments as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth and good cash flow from operations. 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 9.7%. Since the same quarter one year prior, revenues rose by 25.2%. 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 $14.31 million or 8.62% when compared to the same quarter last year. Despite an increase in cash flow, RETAIL OPPORTUNITY INVTS CP's average is still marginally south of the industry average growth rate of 15.97%.
  • After a year of stock price fluctuations, the net result is that ROIC'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. Despite the stock's decline during the last year, it is still somewhat more expensive (in proportion to its earnings over the last year) than most other stocks in its industry. We feel, however, that other strengths this company displays offset this slight negative.
  • The gross profit margin for RETAIL OPPORTUNITY INVTS CP is currently lower than what is desirable, coming in at 29.86%. Regardless of ROIC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, ROIC's net profit margin of 11.25% is significantly lower than the industry average.
  • RETAIL OPPORTUNITY INVTS CP's earnings per share declined by 28.6% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, RETAIL OPPORTUNITY INVTS CP reported lower earnings of $0.23 versus $0.47 in the prior year. This year, the market expects earnings to be in line with last year ($0.23 versus $0.23).

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GEO Group

Dividend Yield: 8.50%

GEO Group (NYSE: GEO) shares currently have a dividend yield of 8.50%.

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 16.01.

The average volume for GEO Group has been 571,600 shares per day over the past 30 days. GEO Group has a market cap of $2.2 billion and is part of the real estate industry. Shares are down 27.8% 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 5.3% in earnings ($1.89 versus $1.99).
  • The share price of GEO GROUP INC has not done very well: it is down 22.32% 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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