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."

Chesapeake Lodging

Dividend Yield: 6.50%

Chesapeake Lodging (NYSE: CHSP) shares currently have a dividend yield of 6.50%.

Chesapeake Lodging Trust is a self-advised real estate investment trust organized in the state of Maryland in June 2009. The company focuses on investments primarily in upper-upscale hotels in major business and convention markets and premium select-service hotels in urban settings or unique locations in the United States. The company has a P/E ratio of 27.52.

The average volume for Chesapeake Lodging has been 446,800 shares per day over the past 30 days. Chesapeake Lodging has a market cap of $1.5 billion and is part of the real estate industry. Shares are down 0.2% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Chesapeake Lodging as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels and good cash flow from operations. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 6.3%. Since the same quarter one year prior, revenues rose by 26.1%. 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 $53.14 million or 36.90% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 7.99%.
  • CHESAPEAKE LODGING TRUST's earnings per share declined by 19.2% 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, CHESAPEAKE LODGING TRUST increased its bottom line by earning $1.01 versus $0.72 in the prior year. This year, the market expects an improvement in earnings ($1.02 versus $1.01).
  • The change in net income 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 has decreased by 5.3% when compared to the same quarter one year ago, dropping from $28.69 million to $27.18 million.

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PacWest Bancorp

Dividend Yield: 5.50%

PacWest Bancorp (NASDAQ: PACW) shares currently have a dividend yield of 5.50%.

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 13.51.

The average volume for PacWest Bancorp has been 937,200 shares per day over the past 30 days. PacWest Bancorp has a market cap of $4.4 billion and is part of the banking industry. Shares are down 14.8% year-to-date as of the close of trading on Friday.

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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 robust revenue growth, increase in net income, expanding profit margins, reasonable valuation levels and notable return on equity. 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 revenue growth came in higher than the industry average of 0.7%. Since the same quarter one year prior, revenues rose by 22.1%. 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.
  • PACWEST BANCORP's earnings per share declined by 14.5% 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, PACWEST BANCORP increased its bottom line by earning $2.81 versus $1.97 in the prior year. This year, the market expects an improvement in earnings ($2.95 versus $2.81).
  • 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 Commercial Banks industry average. The net income increased by 1.2% when compared to the same quarter one year prior, going from $71.00 million to $71.84 million.
  • The gross profit margin for PACWEST BANCORP is currently very high, coming in at 89.66%. 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, the net profit margin of 26.45% trails the industry average.

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Southern

Dividend Yield: 4.50%

Southern (NYSE: SO) shares currently have a dividend yield of 4.50%.

The Southern Company, together with its subsidiaries, operates as a public electric utility company. The company has a P/E ratio of 18.50.

The average volume for Southern has been 4,783,200 shares per day over the past 30 days. Southern has a market cap of $43.9 billion and is part of the utilities industry. Shares are up 4.5% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Southern 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, expanding profit margins and good cash flow from operations. 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:
  • SO's revenue growth has slightly outpaced the industry average of 6.5%. Since the same quarter one year prior, revenues slightly increased by 1.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SOUTHERN CO has improved earnings per share by 31.3% 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 year. We feel that this trend should continue. During the past fiscal year, SOUTHERN CO increased its bottom line by earning $2.18 versus $1.87 in the prior year. This year, the market expects an improvement in earnings ($2.87 versus $2.18).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electric Utilities industry. The net income increased by 31.8% when compared to the same quarter one year prior, rising from $735.00 million to $969.00 million.
  • 43.29% is the gross profit margin for SOUTHERN CO which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.94% is above that of the industry average.
  • Net operating cash flow has increased to $2,981.00 million or 13.90% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 0.56%.

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