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."

Meredith

Dividend Yield: 4.80%

Meredith (NYSE: MDP) shares currently have a dividend yield of 4.80%.

Meredith Corporation operates as a diversified media company that focuses primarily on the home and family marketplace in the United States. It operates in two segments, Local Media and National Media. The company has a P/E ratio of 14.49.

The average volume for Meredith has been 207,900 shares per day over the past 30 days. Meredith has a market cap of $1.4 billion and is part of the media industry. Shares are down 14% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Meredith as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.5%. Since the same quarter one year prior, revenues slightly increased by 3.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.87, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that MDP's debt-to-equity ratio is low, the quick ratio, which is currently 0.57, displays a potential problem in covering short-term cash needs.
  • MEREDITH CORP 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, MEREDITH CORP increased its bottom line by earning $3.02 versus $2.50 in the prior year. This year, the market expects an improvement in earnings ($3.11 versus $3.02).
  • The gross profit margin for MEREDITH CORP is rather high; currently it is at 60.18%. Regardless of MDP'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 2.86% trails the industry average.

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Dow Chemical

Dividend Yield: 4.30%

Dow Chemical (NYSE: DOW) shares currently have a dividend yield of 4.30%.

The Dow Chemical Company manufactures and supplies products that are used primarily as raw materials in the manufacture of customer products and services worldwide. The company has a P/E ratio of 11.17.

The average volume for Dow Chemical has been 11,803,500 shares per day over the past 30 days. Dow Chemical has a market cap of $50.1 billion and is part of the chemicals industry. Shares are down 18.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Dow Chemical as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations and impressive record of earnings per share growth. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 46.7% when compared to the same quarter one year prior, rising from $937.00 million to $1,375.00 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.81, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.20, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has increased to $2,511.00 million or 41.46% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 3.90%.
  • 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 Chemicals industry and the overall market on the basis of return on equity, DOW CHEMICAL has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

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AT&T

Dividend Yield: 5.50%

AT&T (NYSE: T) shares currently have a dividend yield of 5.50%.

AT&T Inc. provides telecommunications services in the United States and internationally. The company operates through two segments, Wireless and Wireline. The company has a P/E ratio of 39.04.

The average volume for AT&T has been 25,006,500 shares per day over the past 30 days. AT&T has a market cap of $216.2 billion and is part of the telecommunications industry. Shares are up 1.7% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates AT&T as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • T's revenue growth has slightly outpaced the industry average of 11.2%. Since the same quarter one year prior, revenues rose by 18.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $10,797.00 million or 23.76% when compared to the same quarter last year. Despite an increase in cash flow, AT&T INC's average is still marginally south of the industry average growth rate of 29.74%.
  • The gross profit margin for AT&T INC is rather high; currently it is at 55.43%. Regardless of T'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 7.65% trails the industry average.
  • AT&T INC's earnings per share declined by 16.7% 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 year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, AT&T INC reported lower earnings of $1.23 versus $3.41 in the prior year. This year, the market expects an improvement in earnings ($2.71 versus $1.23).
  • Compared to where it was trading a year ago, T's share price has not changed very much due to (a) the relatively weak year-over-year performance of the overall market, (b) the company's stagnant earnings, and (c) other mixed results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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