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."

Digital Realty

Dividend Yield: 4.10%

Digital Realty (NYSE: DLR) shares currently have a dividend yield of 4.10%.

Digital Realty Trust, Inc., a real estate investment trust (REIT), through its controlling interest in Digital Realty Trust, L.P., engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate. The company has a P/E ratio of 54.54.

The average volume for Digital Realty has been 1,530,500 shares per day over the past 30 days. Digital Realty has a market cap of $12.5 billion and is part of the real estate industry. Shares are up 14.5% year-to-date as of the close of trading on Tuesday.

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

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.9%. Since the same quarter one year prior, revenues rose by 21.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 52.8% when compared to the same quarter one year prior, rising from -$33.84 million to -$15.98 million.
  • Powered by its strong earnings growth of 28.20% and other important driving factors, this stock has surged by 31.93% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • DIGITAL REALTY TRUST INC has improved earnings per share by 28.2% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, DIGITAL REALTY TRUST INC increased its bottom line by earning $1.61 versus $0.98 in the prior year. For the next year, the market is expecting a contraction of 42.9% in earnings ($0.92 versus $1.61).
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, DIGITAL REALTY TRUST INC's return on equity is below that of both the industry average and the S&P 500.

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EPR Properties

Dividend Yield: 6.00%

EPR Properties (NYSE: EPR) shares currently have a dividend yield of 6.00%.

EPR Properties is a real estate investment trust. It invests in the real estate markets of United States and Canada. The firm develops, owns, leases and finances properties in select market segments primarily related to entertainment, education and recreation. The company has a P/E ratio of 21.86.

The average volume for EPR Properties has been 697,100 shares per day over the past 30 days. EPR Properties has a market cap of $4.0 billion and is part of the real estate industry. Shares are up 8.4% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates EPR Properties 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, solid stock price performance and increase in net income. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.9%. Since the same quarter one year prior, revenues slightly increased by 6.8%. 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 $93.64 million or 14.07% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 2.04%.
  • EPR PROPERTIES' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, EPR PROPERTIES increased its bottom line by earning $2.93 versus $2.78 in the prior year. This year, the market expects an improvement in earnings ($3.06 versus $2.93).
  • The gross profit margin for EPR PROPERTIES is currently very high, coming in at 72.53%. Regardless of EPR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EPR's net profit margin of 46.99% significantly outperformed against the industry.
  • 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, despite the company's weak earnings results. 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.

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PPL

Dividend Yield: 4.20%

PPL (NYSE: PPL) shares currently have a dividend yield of 4.20%.

PPL Corporation, a utility company, delivers electricity and natural gas in the United States and the United Kingdom. The company has a P/E ratio of 15.34.

The average volume for PPL has been 5,121,900 shares per day over the past 30 days. PPL has a market cap of $24.5 billion and is part of the utilities industry. Shares are up 7% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates PPL as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, 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:
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Electric Utilities industry and the overall market, PPL CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $936.00 million or 20.77% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 2.04%.
  • 46.97% is the gross profit margin for PPL CORP which we consider to be strong. Regardless of PPL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PPL's net profit margin of 22.41% significantly outperformed against the industry.
  • 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, despite the company's weak earnings results. 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.
  • PPL CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PPL CORP increased its bottom line by earning $2.38 versus $2.18 in the prior year. For the next year, the market is expecting a contraction of 1.3% in earnings ($2.35 versus $2.38).

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