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."

Dupont Fabros Technology

Dividend Yield: 5.80%

Dupont Fabros Technology (NYSE: DFT) shares currently have a dividend yield of 5.80%.

DuPont Fabros Technology, Inc., a real estate investment trust (REIT), engages in the ownership, acquisition, development, operation, management, and lease of large-scale data center facilities in the United States. The company has a P/E ratio of 29.59.

The average volume for Dupont Fabros Technology has been 599,600 shares per day over the past 30 days. Dupont Fabros Technology has a market cap of $2.1 billion and is part of the real estate industry. Shares are down 2.5% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Dupont Fabros Technology as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, increase in net income and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:
  • DFT's revenue growth has slightly outpaced the industry average of 6.1%. Since the same quarter one year prior, revenues slightly increased by 9.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • Net operating cash flow has increased to $63.91 million or 20.15% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 9.44%.
  • 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 Real Estate Investment Trusts (REITs) industry average. The net income increased by 0.4% when compared to the same quarter one year prior, going from $25.77 million to $25.87 million.
  • 41.10% is the gross profit margin for DUPONT FABROS TECHNOLOGY INC which we consider to be strong. Regardless of DFT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 22.43% trails the industry average.

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Verizon Communications

Dividend Yield: 4.80%

Verizon Communications (NYSE: VZ) shares currently have a dividend yield of 4.80%.

Verizon Communications Inc., through its subsidiaries, provides communications, information, and entertainment products and services to consumers, businesses, and governmental agencies worldwide. The company has a P/E ratio of 19.16.

The average volume for Verizon Communications has been 12,785,000 shares per day over the past 30 days. Verizon Communications has a market cap of $190.2 billion and is part of the telecommunications industry. Shares are up 0.9% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Verizon Communications as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, growth in earnings per share, good cash flow from operations and expanding profit margins. 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 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 Diversified Telecommunication Services industry average. The net income increased by 9.3% when compared to the same quarter one year prior, going from $3,695.00 million to $4,038.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.4%. Since the same quarter one year prior, revenues slightly increased by 5.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • VERIZON COMMUNICATIONS INC has improved earnings per share by 11.2% 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, VERIZON COMMUNICATIONS INC reported lower earnings of $2.51 versus $4.00 in the prior year. This year, the market expects an improvement in earnings ($3.97 versus $2.51).
  • Net operating cash flow has increased to $9,520.00 million or 13.97% when compared to the same quarter last year. Despite an increase in cash flow, VERIZON COMMUNICATIONS INC's average is still marginally south of the industry average growth rate of 16.27%.
  • The gross profit margin for VERIZON COMMUNICATIONS INC is rather high; currently it is at 59.87%. Regardless of VZ's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VZ's net profit margin of 12.17% compares favorably to the industry average.

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Duke Energy Corporation

Dividend Yield: 4.60%

Duke Energy Corporation (NYSE: DUK) shares currently have a dividend yield of 4.60%.

Duke Energy Corporation, together with its subsidiaries, operates as an energy company in the United States and Latin America. It operates through three segments: Regulated Utilities, International Energy, and Commercial Power. The company has a P/E ratio of 20.91.

The average volume for Duke Energy Corporation has been 3,322,300 shares per day over the past 30 days. Duke Energy Corporation has a market cap of $49.5 billion and is part of the utilities industry. Shares are down 13.4% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Duke Energy Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and growth in earnings per share. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • DUK's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 1.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 40.17% is the gross profit margin for DUKE 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 14.37% trails the industry average.
  • DUKE ENERGY CORP has improved earnings per share by 8.8% 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, DUKE ENERGY CORP reported lower earnings of $3.46 versus $3.63 in the prior year. This year, the market expects an improvement in earnings ($4.59 versus $3.46).
  • Even though the current debt-to-equity ratio is 1.07, it is still below the industry average, suggesting that this level of debt is acceptable within the Electric Utilities industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.32 is very low and demonstrates very weak liquidity.
  • Net operating cash flow has declined marginally to $2,517.00 million or 1.21% when compared to the same quarter last year. Despite a decrease in cash flow of 1.21%, DUKE ENERGY CORP is in line with the industry average cash flow growth rate of -7.43%.

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