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."

Washington REIT

Dividend Yield: 4.30%

Washington REIT (NYSE: WRE) shares currently have a dividend yield of 4.30%.

Washington Real Estate Investment Trust is an equity real estate investment trust (REIT). The company engages in the ownership, operation, and development of real properties. The firm invests in real estate markets of the greater Washington D.C. metro region. The company has a P/E ratio of 21.18.

The average volume for Washington REIT has been 430,000 shares per day over the past 30 days. Washington REIT has a market cap of $1.9 billion and is part of the real estate industry. Shares are up 4.2% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Washington REIT as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, increase in net income, revenue growth, attractive valuation levels and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • WASHINGTON REIT 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. During the past fiscal year, WASHINGTON REIT increased its bottom line by earning $1.31 versus $0.06 in the prior year.
  • 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 2551.8% when compared to the same quarter one year prior, rising from $2.34 million to $62.13 million.
  • 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 6.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • After a year of stock price fluctuations, the net result is that WRE's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.

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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. The company accepts demand, money market, and time deposits. The company has a P/E ratio of 12.95.

The average volume for PacWest Bancorp has been 1,249,900 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 16.1% year-to-date as of the close of trading on Thursday.

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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, good cash flow from operations, expanding profit margins, increase in net income and reasonable valuation levels. 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 5.5%. 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.
  • Net operating cash flow has slightly increased to $190.60 million or 3.11% when compared to the same quarter last year. In addition, PACWEST BANCORP has also vastly surpassed the industry average cash flow growth rate of -53.36%.
  • 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, PACW's net profit margin of 26.45% significantly outperformed against the industry.
  • PACWEST BANCORP's earnings per share declined by 13.0% 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 $2.82 versus $1.97 in the prior year. This year, the market expects an improvement in earnings ($2.95 versus $2.82).
  • 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.

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Chesapeake Lodging

Dividend Yield: 6.30%

Chesapeake Lodging (NYSE: CHSP) shares currently have a dividend yield of 6.30%.

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 26.16.

The average volume for Chesapeake Lodging has been 491,700 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 up 3.8% year-to-date as of the close of trading on Thursday.

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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, increase in net income, reasonable valuation levels, good cash flow from operations and growth in earnings per share. 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 18.4%. 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 significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 66.7% when compared to the same quarter one year prior, rising from $8.84 million to $14.73 million.
  • Net operating cash flow has increased to $43.08 million or 26.91% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 2.04%.
  • CHESAPEAKE LODGING TRUST 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, CHESAPEAKE LODGING TRUST reported lower earnings of $0.97 versus $1.01 in the prior year. This year, the market expects an improvement in earnings ($1.30 versus $0.97).

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