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4 Buy-Rated Dividend Stocks: VCI, GOV, RCI, O

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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 and 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 4 stocks with substantial yields, that ultimately, we have rated "Buy."

Valassis Communications

Dividend Yield: 4.40%

Valassis Communications (NYSE:VCI) shares currently have a dividend yield of 4.40%.

Valassis Communications, Inc., together with its subsidiaries, provides media solutions primarily in the United States and Europe. The company has a P/E ratio of 9.52.

The average volume for Valassis Communications has been 421,800 shares per day over the past 30 days. Valassis Communications has a market cap of $1.1 billion and is part of the media industry. Shares are up 9.8% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Valassis Communications as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, attractive valuation levels, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • Powered by its strong earnings growth of 33.33% and other important driving factors, this stock has surged by 45.59% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, VCI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • VALASSIS COMMUNICATIONS INC has improved earnings per share by 33.3% 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 year. We feel that this trend should continue. During the past fiscal year, VALASSIS COMMUNICATIONS INC increased its bottom line by earning $2.86 versus $2.35 in the prior year. This year, the market expects an improvement in earnings ($3.11 versus $2.86).
  • VCI, with its decline in revenue, slightly underperformed the industry average of 0.5%. Since the same quarter one year prior, revenues slightly dropped by 8.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Even though the current debt-to-equity ratio is 1.21, it is still below the industry average, suggesting that this level of debt is acceptable within the Media industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.10 is sturdy.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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