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."

Scorpio Tankers

Dividend Yield: 11.80%

Scorpio Tankers (NYSE: STNG) shares currently have a dividend yield of 11.80%.

Scorpio Tankers Inc., together with its subsidiaries, engages in the seaborne transportation of refined petroleum products and crude oil worldwide. The company has a P/E ratio of 3.18.

The average volume for Scorpio Tankers has been 2,501,500 shares per day over the past 30 days. Scorpio Tankers has a market cap of $735.4 million and is part of the transportation industry. Shares are down 42.8% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Scorpio Tankers as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 24.0%. Since the same quarter one year prior, revenues slightly increased by 2.8%. 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.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SCORPIO TANKERS INC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 60.24%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 32.00% compared to the year-earlier 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.
  • The debt-to-equity ratio of 1.41 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, STNG maintains a poor quick ratio of 0.87, which illustrates the inability to avoid short-term cash problems.

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Western Gas Partners

Dividend Yield: 6.50%

Western Gas Partners (NYSE: WES) shares currently have a dividend yield of 6.50%.

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 341,000 shares per day over the past 30 days. Western Gas Partners has a market cap of $7.1 billion and is part of the energy industry. Shares are up 6% year-to-date as of the close of trading on Tuesday.

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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 22.89% 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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Enbridge Energy Partners

Dividend Yield: 10.30%

Enbridge Energy Partners (NYSE: EEP) shares currently have a dividend yield of 10.30%.

Enbridge Energy Partners, L.P. owns and operates a diversified portfolio of crude oil and natural gas transportation systems in the United States. It operates through two segments, Liquids and Natural Gas. The company has a P/E ratio of 374.83.

The average volume for Enbridge Energy Partners has been 1,120,200 shares per day over the past 30 days. Enbridge Energy Partners has a market cap of $9.7 billion and is part of the energy industry. Shares are up 1.9% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Enbridge Energy Partners as a hold. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including generally higher debt management risk, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • The gross profit margin for ENBRIDGE ENERGY PRTNRS -LP is rather high; currently it is at 60.36%. It has increased significantly from the same period last year. Along with this, the net profit margin of 9.75% is above that of the industry average.
  • EEP, with its decline in revenue, slightly underperformed the industry average of 24.0%. Since the same quarter one year prior, revenues fell by 25.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Net operating cash flow has decreased to $266.30 million or 30.01% when compared to the same quarter last year. Despite a decrease in cash flow ENBRIDGE ENERGY PRTNRS -LP is still fairing well by exceeding its industry average cash flow growth rate of -49.80%.
  • Currently the debt-to-equity ratio of 1.75 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.22, which clearly demonstrates the inability to cover short-term cash needs.

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