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 "Hold."

OGE Energy

Dividend Yield: 4.40%

OGE Energy (NYSE: OGE) shares currently have a dividend yield of 4.40%.

OGE Energy Corp., together with its subsidiaries, operates as an energy and energy services provider that offers physical delivery and related services for electricity and natural gas primarily in the south central United States. The company has a P/E ratio of 16.39.

The average volume for OGE Energy has been 1,294,300 shares per day over the past 30 days. OGE Energy has a market cap of $4.9 billion and is part of the utilities industry. Shares are down 29.8% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates OGE Energy as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • Net operating cash flow has slightly increased to $303.30 million or 6.53% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -7.74%.
  • 45.67% is the gross profit margin for OGE ENERGY CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 15.44% trails the industry average.
  • The debt-to-equity ratio is somewhat low, currently at 0.82, 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 0.46 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 30.02%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 41.48% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, OGE is still more expensive than most of the other companies in its industry.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Electric Utilities industry and the overall market, OGE ENERGY CORP's return on equity is below that of both the industry average and the S&P 500.

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NRG Energy

Dividend Yield: 6.30%

NRG Energy (NYSE: NRG) shares currently have a dividend yield of 6.30%.

NRG Energy, Inc., together with its subsidiaries, operates as a power company.

The average volume for NRG Energy has been 8,617,000 shares per day over the past 30 days. NRG Energy has a market cap of $2.9 billion and is part of the utilities industry. Shares are down 65.6% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates NRG Energy as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • NRG ENERGY INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, NRG ENERGY INC turned its bottom line around by earning $0.21 versus -$1.22 in the prior year. This year, the market expects an improvement in earnings ($0.38 versus $0.21).
  • Net operating cash flow has increased to $934.00 million or 25.53% when compared to the same quarter last year. Despite an increase in cash flow, NRG ENERGY INC's average is still marginally south of the industry average growth rate of 26.47%.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.3%. Since the same quarter one year prior, revenues slightly dropped by 3.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Independent Power Producers & Energy Traders industry. The net income has significantly decreased by 60.7% when compared to the same quarter one year ago, falling from $168.00 million to $66.00 million.
  • The gross profit margin for NRG ENERGY INC is rather low; currently it is at 17.24%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.48% trails that of the industry average.

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Tesoro Logistics

Dividend Yield: 7.20%

Tesoro Logistics (NYSE: TLLP) shares currently have a dividend yield of 7.20%.

Tesoro Logistics LP owns, operates, develops, and acquires logistics assets related to crude oil and refined products in the United States. It operates in three segments: Gathering, Processing, and Terminalling and Transportation. The company has a P/E ratio of 31.79.

The average volume for Tesoro Logistics has been 390,100 shares per day over the past 30 days. Tesoro Logistics has a market cap of $3.7 billion and is part of the energy industry. Shares are down 27% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Tesoro Logistics as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • TLLP's very impressive revenue growth greatly exceeded the industry average of 36.8%. Since the same quarter one year prior, revenues leaped by 87.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 128.4% when compared to the same quarter one year prior, rising from $32.40 million to $74.00 million.
  • TESORO LOGISTICS LP reported significant earnings per share improvement 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, TESORO LOGISTICS LP reported lower earnings of $1.42 versus $1.45 in the prior year. This year, the market expects an improvement in earnings ($2.55 versus $1.42).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, TESORO LOGISTICS LP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The debt-to-equity ratio of 1.36 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, TLLP maintains a poor quick ratio of 0.84, which illustrates the inability to avoid short-term cash problems.

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