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."

Southern

Dividend Yield: 4.30%

Southern (NYSE: SO) shares currently have a dividend yield of 4.30%.

The Southern Company, together with its subsidiaries, engages in the generation, transmission, and distribution of electricity through coal, nuclear, oil and gas, and hydro resources in the states of Alabama, Georgia, Florida, and Mississippi. The company has a P/E ratio of 19.29.

The average volume for Southern has been 5,586,000 shares per day over the past 30 days. Southern has a market cap of $45.6 billion and is part of the utilities industry. Shares are up 7.6% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Southern as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins, notable return on equity, reasonable valuation levels 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:
  • Net operating cash flow has slightly increased to $1,186.00 million or 5.14% when compared to the same quarter last year. In addition, SOUTHERN CO has also modestly surpassed the industry average cash flow growth rate of 2.04%.
  • SOUTHERN CO' 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, SOUTHERN CO increased its bottom line by earning $2.60 versus $2.18 in the prior year. This year, the market expects an improvement in earnings ($2.85 versus $2.60).
  • 36.41% is the gross profit margin for SOUTHERN CO which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.93% trails the industry average.
  • 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 Electric Utilities industry and the overall market on the basis of return on equity, SOUTHERN CO has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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Welltower

Dividend Yield: 5.20%

Welltower (NYSE: HCN) shares currently have a dividend yield of 5.20%.

Welltower Inc. is an independent equity real estate investment trust. The firm engages in acquiring, planning, developing, managing, repositioning and monetizing of real estate assets. It primarily invests in the real estate markets of the United States. The company has a P/E ratio of 28.43.

The average volume for Welltower has been 2,945,500 shares per day over the past 30 days. Welltower has a market cap of $23.6 billion and is part of the real estate industry. Shares are down 3.4% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Welltower as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels, good cash flow from operations, 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:
  • The revenue growth came in higher than the industry average of 7.9%. Since the same quarter one year prior, revenues rose by 19.3%. 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 $337.14 million or 18.50% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 2.04%.
  • 35.53% is the gross profit margin for WELLTOWER INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, HCN's net profit margin of 14.54% significantly trails the industry average.
  • 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, WELLTOWER INC's return on equity is below that of both the industry average and the S&P 500.

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Spectra Energy Partners

Dividend Yield: 5.40%

Spectra Energy Partners (NYSE: SEP) shares currently have a dividend yield of 5.40%.

Spectra Energy Partners, LP operates as an investment arm of Spectra Energy Corp. The company has a P/E ratio of 14.37.

The average volume for Spectra Energy Partners has been 728,700 shares per day over the past 30 days. Spectra Energy Partners has a market cap of $13.5 billion and is part of the energy industry. Shares are down 1.5% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Spectra Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, expanding profit margins, growth in earnings per share 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 greatly exceeded the industry average of 34.6%. Since the same quarter one year prior, revenues slightly increased by 5.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income increased by 7.4% when compared to the same quarter one year prior, going from $283.00 million to $304.00 million.
  • The gross profit margin for SPECTRA ENERGY PARTNERS LP is rather high; currently it is at 62.46%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 47.94% significantly outperformed against the industry average.
  • SPECTRA ENERGY PARTNERS LP's earnings per share improvement from the most recent quarter was slightly positive. 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, SPECTRA ENERGY PARTNERS LP increased its bottom line by earning $3.30 versus $2.84 in the prior year. This year, the market expects an improvement in earnings ($3.47 versus $3.30).
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, SPECTRA ENERGY PARTNERS LP's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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