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."

Ameren

Dividend Yield: 4.10%

Ameren (NYSE: AEE) shares currently have a dividend yield of 4.10%.

Ameren Corporation operates as a public utility holding company in the United States. The company engages in the rate-regulated electric generation, transmission, and distribution; and rate-regulated natural gas transmission and distribution businesses. The company has a P/E ratio of 17.03.

The average volume for Ameren has been 1,751,300 shares per day over the past 30 days. Ameren has a market cap of $10.1 billion and is part of the utilities industry. Shares are down 9.4% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Ameren as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, expanding profit margins, good cash flow from operations and growth in earnings per share. 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 3.1%. Since the same quarter one year prior, revenues slightly increased by 9.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • AMEREN CORP has improved earnings per share by 17.5% 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, AMEREN CORP increased its bottom line by earning $2.41 versus $2.10 in the prior year. This year, the market expects an improvement in earnings ($2.60 versus $2.41).
  • 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 Multi-Utilities industry average. The net income increased by 17.1% when compared to the same quarter one year prior, going from $293.00 million to $343.00 million.
  • 45.12% is the gross profit margin for AMEREN CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.71% is above that of the industry average.

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Ship Finance International

Dividend Yield: 11.70%

Ship Finance International (NYSE: SFL) shares currently have a dividend yield of 11.70%.

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 15.47.

The average volume for Ship Finance International has been 766,000 shares per day over the past 30 days. Ship Finance International has a market cap of $1.4 billion and is part of the transportation industry. Shares are up 8.6% year-to-date as of the close of trading on Monday.

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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 robust revenue growth, notable return on equity, expanding profit margins, solid stock price performance and impressive record of earnings per share growth. 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 revenue growth greatly exceeded the industry average of 36.8%. Since the same quarter one year prior, revenues rose by 33.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 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.
  • SHIP FINANCE INTL LTD has improved earnings per share by 26.5% 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 year. We feel that this trend should continue. 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 ($2.31 versus $1.25).
  • 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 31.5% when compared to the same quarter one year prior, rising from $34.59 million to $45.49 million.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, SHIP FINANCE INTL LTD's return on equity exceeds that of both the industry average and the S&P 500.

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Public Service Enterprise Group

Dividend Yield: 4.20%

Public Service Enterprise Group (NYSE: PEG) shares currently have a dividend yield of 4.20%.

Public Service Enterprise Group Incorporated, through its subsidiaries, operates as an energy company primarily in the northeastern and Mid Atlantic United States. The company has a P/E ratio of 6.46.

The average volume for Public Service Enterprise Group has been 3,279,500 shares per day over the past 30 days. Public Service Enterprise Group has a market cap of $18.7 billion and is part of the utilities industry. Shares are down 9.5% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Public Service Enterprise Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, attractive valuation levels, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • PEG's revenue growth has slightly outpaced the industry average of 3.1%. Since the same quarter one year prior, revenues slightly increased by 1.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant 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 Multi-Utilities industry and the overall market, PUBLIC SERVICE ENTRP GRP INC's return on equity exceeds that of both the industry average and the S&P 500.
  • 41.93% is the gross profit margin for PUBLIC SERVICE ENTRP GRP INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 16.33% is above that of the industry average.
  • 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. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.41 is very weak and demonstrates a lack of ability to pay short-term obligations.

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