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: 4.70%

International Paper (NYSE: IP) shares currently have a dividend yield of 4.70%.

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 17.60.

The average volume for International Paper has been 3,175,700 shares per day over the past 30 days. International Paper has a market cap of $15.6 billion and is part of the consumer non-durables industry. Shares are up 0.8% year-to-date as of the close of trading on Tuesday.

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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 29.73%, 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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Ship Finance International

Dividend Yield: 11.10%

Ship Finance International (NYSE: SFL) shares currently have a dividend yield of 11.10%.

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 16.39.

The average volume for Ship Finance International has been 727,800 shares per day over the past 30 days. Ship Finance International has a market cap of $1.5 billion and is part of the transportation industry. Shares are down 2.2% year-to-date as of the close of trading on Tuesday.

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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, good cash flow from operations and solid stock price performance. 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 ($2.35 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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PacWest Bancorp

Dividend Yield: 4.70%

PacWest Bancorp (NASDAQ: PACW) shares currently have a dividend yield of 4.70%.

PacWest Bancorp operates as the holding company for Pacific Western Bank that provides commercial banking products and services to individuals, professionals, and small to mid-sized businesses in the United States. It accepts demand, money market, and time deposits. The company has a P/E ratio of 14.29.

The average volume for PacWest Bancorp has been 747,700 shares per day over the past 30 days. PacWest Bancorp has a market cap of $5.1 billion and is part of the banking industry. Shares are down 2.6% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates PacWest Bancorp as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, 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 lackluster performance in the stock itself.

Highlights from the ratings report include:
  • PACW's revenue growth has slightly outpaced the industry average of 1.3%. Since the same quarter one year prior, revenues slightly increased by 2.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • PACWEST BANCORP has improved earnings per share by 13.3% 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, PACWEST BANCORP increased its bottom line by earning $1.97 versus $1.08 in the prior year. This year, the market expects an improvement in earnings ($2.88 versus $1.97).
  • 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 Commercial Banks industry average. The net income increased by 11.8% when compared to the same quarter one year prior, going from $62.27 million to $69.62 million.
  • Net operating cash flow has increased to $124.28 million or 28.59% when compared to the same quarter last year. Despite an increase in cash flow of 28.59%, PACWEST BANCORP is still growing at a significantly lower rate than the industry average of 302.97%.
  • The gross profit margin for PACWEST BANCORP is currently very high, coming in at 89.30%. Regardless of PACW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PACW's net profit margin of 31.15% compares favorably to the industry average.

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