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."

Western Gas Partners

Dividend Yield: 6.80%

Western Gas Partners (NYSE: WES) shares currently have a dividend yield of 6.80%.

Western Gas Partners, LP acquires, develops, owns, and operates midstream energy assets in the Rocky Mountains, the Mid-Continent, North-central Pennsylvania, and Texas.

The average volume for Western Gas Partners has been 352,100 shares per day over the past 30 days. Western Gas Partners has a market cap of $6.9 billion and is part of the energy industry. Shares are down 2.2% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Western Gas Partners as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, expanding profit margins and good cash flow from operations. 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 174.2% when compared to the same quarter one year prior, rising from -$156.49 million to $116.06 million.
  • The gross profit margin for WESTERN GAS PARTNERS LP is rather high; currently it is at 57.45%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 30.29% significantly outperformed against 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 Oil, Gas & Consumable Fuels industry and the overall market, WESTERN GAS 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.
  • WES's debt-to-equity ratio of 0.87 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 1.12 is sturdy.
  • WES has underperformed the S&P 500 Index, declining 20.05% from its price level of one year ago. 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.

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Macquarie Infrastructure

Dividend Yield: 6.80%

Macquarie Infrastructure (NYSE: MIC) shares currently have a dividend yield of 6.80%.

Macquarie Infrastructure Company LLC, through its subsidiaries, owns, operates, and invests in infrastructure businesses that provide services to businesses, government agencies, and individuals primarily in the United States. The company has a P/E ratio of 639.09.

The average volume for Macquarie Infrastructure has been 516,900 shares per day over the past 30 days. Macquarie Infrastructure has a market cap of $5.6 billion and is part of the transportation industry. Shares are down 4% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Macquarie Infrastructure as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and growth in earnings per share. 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 generally higher debt management risk.

Highlights from the ratings report include:
  • Net operating cash flow has increased to $148.57 million or 26.96% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 7.71%.
  • The gross profit margin for MACQUARIE INFRASTRUCTURE CP is rather high; currently it is at 62.28%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, MIC's net profit margin of 5.63% significantly trails the industry average.
  • MACQUARIE INFRASTRUCTURE CP 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, MACQUARIE INFRASTRUCTURE CP swung to a loss, reporting -$1.48 versus $14.70 in the prior year. This year, the market expects an improvement in earnings ($1.59 versus -$1.48).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Transportation Infrastructure industry and the overall market, MACQUARIE INFRASTRUCTURE CP's return on equity significantly trails that of both the industry average and the S&P 500.
  • MIC has underperformed the S&P 500 Index, declining 17.33% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

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Targa Resources

Dividend Yield: 8.90%

Targa Resources (NYSE: TRGP) shares currently have a dividend yield of 8.90%.

Targa Resources Corp., through its general and limited partner interests in Targa Resources Partners LP, provides midstream natural gas and natural gas liquid (NGL) services in the United States. The company operates in two divisions, Gathering and Processing, and Logistics and Marketing. The company has a P/E ratio of 42.80.

The average volume for Targa Resources has been 2,857,700 shares per day over the past 30 days. Targa Resources has a market cap of $6.6 billion and is part of the energy industry. Shares are up 43.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Targa Resources as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. 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:
  • Despite the weak revenue results, TRGP has outperformed against the industry average of 24.6%. Since the same quarter one year prior, revenues fell by 14.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • TRGP's debt-to-equity ratio of 0.89 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 0.78 is weak.
  • TARGA RESOURCES CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, TARGA RESOURCES CORP reported lower earnings of $1.05 versus $2.44 in the prior year. For the next year, the market is expecting a contraction of 107.1% in earnings (-$0.08 versus $1.05).
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 184.4% when compared to the same quarter one year ago, falling from $3.20 million to -$2.70 million.

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