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."

Select Income REIT

Dividend Yield: 9.20%

Select Income REIT (NYSE: SIR) shares currently have a dividend yield of 9.20%.

Select Income REIT, a real estate investment trust (REIT), primarily owns and invests in single tenant and net leased properties. The company has a P/E ratio of 25.33.

The average volume for Select Income REIT has been 492,600 shares per day over the past 30 days. Select Income REIT has a market cap of $1.9 billion and is part of the real estate industry. Shares are up 11.4% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Select Income REIT as a hold. 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. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • SIR's very impressive revenue growth greatly exceeded the industry average of 7.9%. Since the same quarter one year prior, revenues leaped by 106.3%. 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.
  • The gross profit margin for SELECT INCOME REIT is rather high; currently it is at 52.95%. Regardless of SIR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SIR's net profit margin of 9.34% is significantly lower than the industry average.
  • 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 59.5% when compared to the same quarter one year ago, falling from $26.89 million to $10.88 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, SELECT INCOME REIT's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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DDR

Dividend Yield: 4.40%

DDR (NYSE: DDR) shares currently have a dividend yield of 4.40%.

DDR Corp. is an equity real estate investment trust. It invests in the real estate markets of the United States and Puerto Rico. The firm is in the business of acquiring, owning, developing, redeveloping, expanding, leasing and managing shopping centers.

The average volume for DDR has been 2,445,500 shares per day over the past 30 days. DDR has a market cap of $6.3 billion and is part of the real estate industry. Shares are up 2.7% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates DDR as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and a generally disappointing 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 Real Estate Investment Trusts (REITs) industry. The net income increased by 973.5% when compared to the same quarter one year prior, rising from -$10.70 million to $93.47 million.
  • Net operating cash flow has increased to $133.69 million or 27.49% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 2.04%.
  • DDR CORP 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, DDR CORP reported poor results of -$0.27 versus -$0.01 in the prior year. This year, the market expects an improvement in earnings ($0.12 versus -$0.27).
  • DDR is off 6.77% from its price level of one year ago, reflecting the general market trend and ignoring their higher earnings per share compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, DDR CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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NuStar Energy

Dividend Yield: 11.90%

NuStar Energy (NYSE: NS) shares currently have a dividend yield of 11.90%.

NuStar Energy L.P. engages in the terminalling, storage, and marketing of petroleum products; and transportation of petroleum products and anhydrous ammonia. It operates through three segments: Pipeline, Storage, and Fuels Marketing. The company has a P/E ratio of 11.23.

The average volume for NuStar Energy has been 607,200 shares per day over the past 30 days. NuStar Energy has a market cap of $2.9 billion and is part of the energy industry. Shares are up 0.8% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates NuStar Energy as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, notable return on equity and reasonable valuation levels. 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 net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 11.4% when compared to the same quarter one year prior, going from $53.39 million to $59.48 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NUSTAR ENERGY LP's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 34.6%. Since the same quarter one year prior, revenues fell by 31.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • NUSTAR ENERGY LP has improved earnings per share by 10.9% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, NUSTAR ENERGY LP increased its bottom line by earning $3.29 versus $2.14 in the prior year. For the next year, the market is expecting a contraction of 34.6% in earnings ($2.15 versus $3.29).
  • NS'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 38.41%, 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

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