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."

International Paper

Dividend Yield: 4.50%

International Paper (NYSE: IP) shares currently have a dividend yield of 4.50%.

International Paper Company operates as a paper and packaging company in North America, Europe, Latin America, Russia, Asia, Africa, and the Middle East. The company operates through three segments: Industrial Packaging, Printing Papers, and Consumer Packaging. The company has a P/E ratio of 18.36.

The average volume for International Paper has been 3,230,400 shares per day over the past 30 days. International Paper has a market cap of $16.3 billion and is part of the consumer non-durables industry. Shares are down 26.5% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates International Paper as a buy. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

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 Paper & Forest Products industry and the overall market, INTL PAPER CO's return on equity exceeds that of both the industry average and the S&P 500.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 11.8%. Since the same quarter one year prior, revenues slightly dropped by 5.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • INTL PAPER CO's earnings per share declined by 32.9% 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 two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, INTL PAPER CO reported lower earnings of $1.33 versus $3.81 in the prior year. This year, the market expects an improvement in earnings ($3.67 versus $1.33).
  • The change in net income from the same quarter one year ago has exceeded that of the Paper & Forest Products industry average, but is less than that of the S&P 500. The net income has significantly decreased by 38.0% when compared to the same quarter one year ago, falling from $355.00 million to $220.00 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.07%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 32.91% compared to the year-earlier quarter. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.

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Omega Healthcare Investors

Dividend Yield: 6.70%

Omega Healthcare Investors (NYSE: OHI) shares currently have a dividend yield of 6.70%.

Omega Healthcare Investors, Inc. is a real estate investment firm. The firm invests in the real estate markets of United States. It invests in healthcare facilities, primarily in long-term healthcare facilities in order to create its portfolio. Omega Healthcare Investors, Inc. The company has a P/E ratio of 23.81.

The average volume for Omega Healthcare Investors has been 1,282,700 shares per day over the past 30 days. Omega Healthcare Investors has a market cap of $6.3 billion and is part of the real estate industry. Shares are down 14.4% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Omega Healthcare Investors as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income, good cash flow from operations and expanding profit margins. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • OHI's very impressive revenue growth greatly exceeded the industry average of 6.1%. Since the same quarter one year prior, revenues leaped by 54.6%. 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.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 28.7% when compared to the same quarter one year prior, rising from $61.71 million to $79.40 million.
  • Net operating cash flow has increased to $129.71 million or 39.71% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 9.41%.
  • The gross profit margin for OMEGA HEALTHCARE INVS INC is rather high; currently it is at 69.21%. Regardless of OHI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, OHI's net profit margin of 39.31% significantly outperformed against the industry.
  • OMEGA HEALTHCARE INVS INC's earnings per share declined by 10.4% 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, OMEGA HEALTHCARE INVS INC increased its bottom line by earning $1.74 versus $1.46 in the prior year. For the next year, the market is expecting a contraction of 21.3% in earnings ($1.37 versus $1.74).

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Pebblebrook Hotel

Dividend Yield: 4.10%

Pebblebrook Hotel (NYSE: PEB) shares currently have a dividend yield of 4.10%.

Pebblebrook Hotel Trust, through Pebblebrook Hotel, L.P., operates as a real estate investment trust. The company acquires and invests primarily in hotel properties located in the United States. The company has a P/E ratio of 36.01.

The average volume for Pebblebrook Hotel has been 922,700 shares per day over the past 30 days. Pebblebrook Hotel has a market cap of $2.2 billion and is part of the real estate industry. Shares are down 34.5% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Pebblebrook Hotel as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, reasonable valuation levels and good cash flow from operations. 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 came in higher than the industry average of 6.1%. Since the same quarter one year prior, revenues rose by 26.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • PEBBLEBROOK HOTEL TRUST has improved earnings per share by 19.4% 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 two years. We feel that this trend should continue. During the past fiscal year, PEBBLEBROOK HOTEL TRUST increased its bottom line by earning $0.72 versus $0.32 in the prior year. This year, the market expects an improvement in earnings ($0.96 versus $0.72).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 26.4% when compared to the same quarter one year prior, rising from $30.17 million to $38.12 million.
  • Net operating cash flow has increased to $67.95 million or 13.60% when compared to the same quarter last year. In addition, PEBBLEBROOK HOTEL TRUST has also modestly surpassed the industry average cash flow growth rate of 9.41%.

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