Many investors make buy or sell decisions based on analyst recommendations about stocks, but this isn’t always a smart strategy. While it’s true analysts spend more time than the rest of us studying company data, at the end of the day, it still comes down to individual opinions, and it’s rare that a group of analysts shares the same opinion about a specific stock. Despite looking at exactly the same information, one analyst may recommend a stock as “buy” while another may issue the same stock a “hold” or even a “sell” recommendation.  

Another reason I take analyst ratings with a grain of salt is that analysts mainly focus on the short-term results for the upcoming quarter or year. As an income investor, I’m more interested in a stock’s long-term outlook and ability to cover its dividend. And if you follow Amy Calistri’s Daily Paycheck strategy, this should be among your primary concerns, too. 

Because analyst recommendations hardly ever consider these factors, I think some stocks rated a “hold” are worth a second look. 

I’ve found three high-yield stocks with a “hold” rating by most analysts that look appealing. The “hold” recommendation likely means they’re expected to perform in tandem with the market, so I don’t expect any sharp changes in their prices. Yet, each of these stocks yields at least 5% and pays dividends well secured by strong cash flow and/or earnings. 

1. Atlantic Power Corp. (NYSE: AT)
Yield: 8%

Atlantic Power owns power-generation assets in the United States and Canada. The company sells electricity to utilities and other large customers under long-term purchase agreements that provide a very stable stream of cash flow. Atlantic Power has 2,140 MW of generating capacity and owns interests in 31 operating power stations across 11 states and two Canadian provinces. 

The company’s EBITDA improved 158% in the first quarter of 2012 to $93 million from the same period in 2011, due mainly to 18 projects that were added to its portfolio as a result of the acquisition of Capital Power Income last year. 

Cash available for distributions nearly tripled to $60 million in this year’s first quarter in comparison with the same period last year. Atlantic Power anticipates receiving from its projects cash distributions between $250 million and $265 million in 2012. 

The company has increased its dividend four times since its initial public offering in 2005, and currently pays monthly dividends at a $1.12 annual rate yielding roughly 8%. The dividend payout was 55% of earnings last quarter. Although Atlantic Power is guiding for payout above 90% this year, it expects a much more conservative payout going forward. 

2. ConocoPhillips (NYSE: COP)
Yield: 5% 

After spinning off its refinery business in May, ConocoPhillips is positioned as the world’s largest independent exploration and production company, with proved reserves of 8.4 billion barrels of oil and daily production averaging 1.62 million barrels. 

ConocoPhillips produced earnings of $2.9 billion, or $2.27 a share during the first quarter of 2012, compared with earnings of $2.6 billion, or $1.82 per share, for the same period in 2011. Share repurchases resulted in 11% earnings per share growth for the quarter. The company also generated $4.2 billion of cash from operations, which provided five-fold coverage of dividend payments totaling $800 million. 

ConocoPhillips has an impressive dividend record showing 10 consecutive years of growth. As a stand-alone business, ConocoPhillips is committed to delivering a sector-leading dividend and 3% to 5% annual growth in production and profit margins. The company plans to invest 75% of its cash flow in production and distribute 25% to investors through dividends. The post-split $2.64 annual dividend yields nearly 5%. 

3. SK Telecom (NYSE: SKM)
Yield: 8%

With 26 million customers and a 50% market share, SK Telecom is South Korea’s dominant mobile telecom service provider. The company introduced LTE smartphones last September and completed the nationwide build-out of its 4G LTE network last month. This has allowed SK Telecom to add 2.4 million LTE subscribers in April, the fastest ramp-up ever for a telecom. The company now expects to exceed its original target of adding 6 million LTE subscribers in 2012. 

Capital spending and tariff cuts hurt recent results, causing first-quarter earnings to fall 40% to about $291 million from $407 million a year earlier. Robust LTE subscriber growth and rising demand for the company’s cloud-computing services, however, enhance this company’s long-term earnings prospects. Consensus estimates look for 8% yearly earnings growth for the next five years. 

SK generated cash flow of $5.5 billion in 2011, which provided nearly 10-fold coverage of the $580 million dividend payment. SK Telecom has paid a $0.82 annual dividend for the past five years, and shares currently yield almost 8%. These shares are also very reasonably priced at a price-to-earnings (P/E) ratio of around 6 and at less than book value. 

Risks to Consider: Earnings prospects for ConocoPhillips could suffer if crude oil prices continue to erode. SK Telecom faces risks of further tariff cuts. In addition, Atlantic Power and SK Telecom have currency risks, while SK Telecom has a high dividend tax rate of 27.5% for U.S. investors. 

Action to take–> My top pick overall is ConocoPhillips, which I believe offers the best prospects for steady dividend growth. Atlantic Power is a good choice for investors who want a more recession-resistant stock, while SK Telecom is attractive based on current low valuation.