Best 3 Yielding Buy-Rated Stocks: DFT, HPQ, PACW

These 3 dividend stocks are rated a Buy by TheStreet
By TheStreet Wire ,

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."

Dupont Fabros Technology

Dividend Yield: 5.10%

Dupont Fabros Technology

(NYSE:

DFT

) shares currently have a dividend yield of 5.10%.

DuPont Fabros Technology, Inc., a real estate investment trust (REIT), engages in the ownership, acquisition, development, operation, management, and lease of large-scale data center facilities in the United States. The company has a P/E ratio of 30.22.

The average volume for Dupont Fabros Technology has been 682,900 shares per day over the past 30 days. Dupont Fabros Technology has a market cap of $2.2 billion and is part of the real estate industry. Shares are down 1.8% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Dupont Fabros Technology

as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, increase in net income and solid stock price performance. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:

  • DFT's revenue growth has slightly outpaced the industry average of 6.0%. Since the same quarter one year prior, revenues slightly increased by 9.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • Net operating cash flow has increased to $63.91 million or 20.15% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -24.80%.
  • 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 Real Estate Investment Trusts (REITs) industry average. The net income increased by 0.4% when compared to the same quarter one year prior, going from $25.77 million to $25.87 million.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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HP

Dividend Yield: 5.00%

HP

(NYSE:

HPQ

) shares currently have a dividend yield of 5.00%.

HP Inc., together with its subsidiaries, provides products, technologies, software, solutions, and services to individual consumers and small- and medium-sized businesses (SMBs), as well as to the government, health, and education sectors worldwide. The company has a P/E ratio of 5.76.

The average volume for HP has been 33,792,300 shares per day over the past 30 days. HP has a market cap of $25.3 billion and is part of the computer hardware industry. Shares are down 65.1% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

HP

as a

buy

. The company's strengths can be seen in multiple areas, such as its attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • The debt-to-equity ratio is somewhat low, currently at 0.94, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that HPQ's debt-to-equity ratio is low, the quick ratio, which is currently 0.67, displays a potential problem in covering short-term cash needs.
  • The revenue fell significantly faster than the industry average of 25.6%. Since the same quarter one year prior, revenues slightly dropped by 8.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Computers & Peripherals industry and the overall market on the basis of return on equity, HP INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, HPQ has underperformed the S&P 500 Index, declining 12.52% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

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PacWest Bancorp

Dividend Yield: 4.30%

PacWest Bancorp

(NASDAQ:

PACW

) shares currently have a dividend yield of 4.30%.

PacWest Bancorp operates as the holding company for Pacific Western Bank that provides commercial banking products and services to individuals, professionals, and small to mid-sized businesses in the United States. It accepts demand, money market, and time deposits. The company has a P/E ratio of 15.72.

The average volume for PacWest Bancorp has been 766,700 shares per day over the past 30 days. PacWest Bancorp has a market cap of $4.8 billion and is part of the banking industry. Shares are up 2.7% year-to-date as of the close of trading on Friday.

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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 revenue growth, growth in earnings per share, increase in net income, expanding profit margins and reasonable valuation levels. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:

  • PACW's revenue growth has slightly outpaced the industry average of 0.4%. Since the same quarter one year prior, revenues slightly increased by 2.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • PACWEST BANCORP has improved earnings per share by 13.3% 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 two years. We feel that this trend should continue. During the past fiscal year, PACWEST BANCORP increased its bottom line by earning $1.97 versus $1.08 in the prior year. This year, the market expects an improvement in earnings ($2.88 versus $1.97).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Commercial Banks industry average. The net income increased by 11.8% when compared to the same quarter one year prior, going from $62.27 million to $69.62 million.
  • The gross profit margin for PACWEST BANCORP is currently very high, coming in at 89.30%. 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 31.15% compares favorably to the industry average.

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