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."

Lamar Advertising

Dividend Yield: 4.60%

Lamar Advertising (NASDAQ: LAMR) shares currently have a dividend yield of 4.60%.

Lamar Advertising Company is a publicly owned equity real estate investment trust. The firm primarily engages in selling advertising space on billboards, buses, shelters, benches, and logo plates. Lamar Advertising Company was founded in 1902 and is headquartered in Baton Rouge, Louisiana. The company has a P/E ratio of 14.68.

The average volume for Lamar Advertising has been 531,500 shares per day over the past 30 days. Lamar Advertising has a market cap of $4.9 billion and is part of the real estate industry. Shares are up 12% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Lamar Advertising as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and notable return on equity. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • 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. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • LAMAR ADVERTISING CO reported significant earnings per share improvement 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, LAMAR ADVERTISING CO increased its bottom line by earning $2.66 versus $0.42 in the prior year. This year, the market expects an improvement in earnings ($2.76 versus $2.66).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 145.3% when compared to the same quarter one year prior, rising from $35.05 million to $85.97 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.1%. Since the same quarter one year prior, revenues slightly increased by 4.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, LAMAR ADVERTISING CO's return on equity significantly exceeds that of both the industry average and the S&P 500.

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Pepco Holdings

Dividend Yield: 4.10%

Pepco Holdings (NYSE: POM) shares currently have a dividend yield of 4.10%.

Pepco Holdings, Inc., through its subsidiaries, engages in the transmission, distribution, and supply of electricity. The company also distributes and supplies natural gas. The company has a P/E ratio of 28.43.

The average volume for Pepco Holdings has been 1,804,200 shares per day over the past 30 days. Pepco Holdings has a market cap of $6.6 billion and is part of the utilities industry. Shares are down 2.8% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Pepco Holdings as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share and increase in net income. 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:
  • POM's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 3.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • PEPCO HOLDINGS INC has improved earnings per share by 16.1% 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, PEPCO HOLDINGS INC increased its bottom line by earning $0.96 versus $0.41 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus $0.96).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Electric Utilities industry average. The net income increased by 15.2% when compared to the same quarter one year prior, going from $79.00 million to $91.00 million.
  • After a year of stock price fluctuations, the net result is that POM'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 decline in its share price over the last year, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry. We feel, however, that other strengths this company displays compensate for this.
  • The debt-to-equity ratio of 1.43 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, POM has a quick ratio of 0.53, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

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GameStop

Dividend Yield: 5.10%

GameStop (NYSE: GME) shares currently have a dividend yield of 5.10%.

GameStop Corp. operates as a multichannel video game retailer. The company has a P/E ratio of 7.85.

The average volume for GameStop has been 2,487,900 shares per day over the past 30 days. GameStop has a market cap of $3.0 billion and is part of the retail industry. Shares are down 15.7% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates GameStop as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • GAMESTOP CORP has improved earnings per share by 6.0% 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, GAMESTOP CORP increased its bottom line by earning $3.54 versus $3.02 in the prior year. This year, the market expects an improvement in earnings ($3.75 versus $3.54).
  • GME's debt-to-equity ratio is very low at 0.18 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.18 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • 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 Specialty Retail industry and the overall market on the basis of return on equity, GAMESTOP CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • GME, with its decline in revenue, slightly underperformed the industry average of 4.4%. Since the same quarter one year prior, revenues slightly dropped by 3.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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