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 "Hold."

Fibria Celulose

Dividend Yield: 19.10%

Fibria Celulose (NYSE: FBR) shares currently have a dividend yield of 19.10%.

Fibria Celulose S.A. engages in the production, sale, and export of eucalyptus pulp, wood, and other forest products. The company has a P/E ratio of 23.42.

The average volume for Fibria Celulose has been 1,070,000 shares per day over the past 30 days. Fibria Celulose has a market cap of $5.6 billion and is part of the consumer non-durables industry. Shares are down 21.3% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Fibria Celulose as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 1.4%. Since the same quarter one year prior, revenues rose by 27.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • FIBRIA CELULOSE SA 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. This trend suggests that the performance of the business is improving. During the past fiscal year, FIBRIA CELULOSE SA increased its bottom line by earning $0.14 versus $0.11 in the prior year. This year, the market expects an improvement in earnings ($4.54 versus $0.14).
  • FBR's debt-to-equity ratio of 1.00 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.25 is sturdy.
  • 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. When compared to other companies in the Paper & Forest Products industry and the overall market, FIBRIA CELULOSE SA's return on equity is below that of both the industry average and the S&P 500.
  • FBR has underperformed the S&P 500 Index, declining 11.35% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

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Western Digital

Dividend Yield: 4.30%

Western Digital (NASDAQ: WDC) shares currently have a dividend yield of 4.30%.

Western Digital Corporation, together with its subsidiaries, engages in the development, manufacture, sale, and provision of data storage solutions that enable consumers, businesses, governments, and other organizations to create, manage, experience, and preserve digital content worldwide. The company has a P/E ratio of 9.42.

The average volume for Western Digital has been 4,053,400 shares per day over the past 30 days. Western Digital has a market cap of $10.9 billion and is part of the computer hardware industry. Shares are down 20% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Western Digital as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income.

Highlights from the ratings report include:
  • Although WDC's debt-to-equity ratio of 0.26 is very low, it is currently higher than that of the industry average. To add to this, WDC has a quick ratio of 2.31, which demonstrates the ability of the company to cover short-term liquidity needs.
  • WDC, with its decline in revenue, underperformed when compared the industry average of 2.5%. Since the same quarter one year prior, revenues fell by 14.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • WESTERN DIGITAL CORP's earnings per share declined by 41.8% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, WESTERN DIGITAL CORP reported lower earnings of $6.17 versus $6.69 in the prior year. For the next year, the market is expecting a contraction of 1.9% in earnings ($6.05 versus $6.17).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Computers & Peripherals industry. The net income has significantly decreased by 42.7% when compared to the same quarter one year ago, falling from $438.00 million to $251.00 million.

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Timken

Dividend Yield: 4.10%

Timken (NYSE: TKR) shares currently have a dividend yield of 4.10%.

The Timken Company engineers, manufactures, and markets bearings, transmissions, gearboxes, and chain and related products worldwide. It operates in two segments: Mobile Industries and Process Industries. The company has a P/E ratio of 510.20.

The average volume for Timken has been 768,500 shares per day over the past 30 days. Timken has a market cap of $2.1 billion and is part of the industrial industry. Shares are down 2% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Timken as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and poor profit margins.

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 Machinery industry. The net income increased by 389.5% when compared to the same quarter one year prior, rising from -$21.90 million to $63.40 million.
  • The current debt-to-equity ratio, 0.54, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.06, which illustrates the ability to avoid short-term cash problems.
  • TIMKEN CO reported significant earnings per share improvement 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, TIMKEN CO reported lower earnings of $1.60 versus $1.81 in the prior year. This year, the market expects an improvement in earnings ($2.06 versus $1.60).
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Machinery industry and the overall market, TIMKEN CO's return on equity significantly trails that of both the industry average and the S&P 500.
  • TKR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 37.31%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, TKR is still more expensive than most of the other companies in its industry.

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