What To Buy: Top 3 Buy-Rated Dividend Stocks: SEP, DFT, CVI - TheStreet

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."

Spectra Energy Partners

Dividend Yield: 6.10%

Spectra Energy Partners

(NYSE:

SEP

) shares currently have a dividend yield of 6.10%.

Spectra Energy Partners, LP operates as an investment arm of Spectra Energy Corp. The company has a P/E ratio of 13.27.

The average volume for Spectra Energy Partners has been 487,100 shares per day over the past 30 days. Spectra Energy Partners has a market cap of $12.2 billion and is part of the energy industry. Shares are down 25.4% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Spectra Energy Partners

as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, expanding profit margins, good cash flow from operations and growth in earnings per share. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 34.1%. Since the same quarter one year prior, revenues rose by 13.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for SPECTRA ENERGY PARTNERS LP is rather high; currently it is at 65.51%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 50.91% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 80.72% to $450.00 million when compared to the same quarter last year. In addition, SPECTRA ENERGY PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -19.46%.
  • 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 42.8% when compared to the same quarter one year prior, rising from $215.00 million to $307.00 million.
  • The current debt-to-equity ratio, 0.56, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that SEP's debt-to-equity ratio is low, the quick ratio, which is currently 0.52, displays a potential problem in covering short-term cash needs.

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Dupont Fabros Technology

Dividend Yield: 5.60%

Dupont Fabros Technology

(NYSE:

DFT

) shares currently have a dividend yield of 5.60%.

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 28.34.

The average volume for Dupont Fabros Technology has been 626,300 shares per day over the past 30 days. Dupont Fabros Technology has a market cap of $2.0 billion and is part of the real estate industry. Shares are down 5.8% year-to-date as of the close of trading on Thursday.

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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, increase in stock price during the past year, good cash flow from operations and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • DFT's revenue growth has slightly outpaced the industry average of 9.8%. Since the same quarter one year prior, revenues rose by 11.6%. 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.
  • Net operating cash flow has slightly increased to $78.39 million or 5.74% when compared to the same quarter last year. Despite an increase in cash flow, DUPONT FABROS TECHNOLOGY INC's average is still marginally south of the industry average growth rate of 13.29%.
  • After a year of stock price fluctuations, the net result is that DFT's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. 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.
  • 39.87% is the gross profit margin for DUPONT FABROS TECHNOLOGY INC which we consider to be strong. Regardless of DFT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 23.25% trails the industry average.

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CVR Energy

Dividend Yield: 4.80%

CVR Energy

(NYSE:

CVI

) shares currently have a dividend yield of 4.80%.

CVR Energy, Inc., through its subsidiaries, engages in petroleum refining and nitrogen fertilizer manufacturing activities in the United States. The company operates through two segments, Petroleum and Nitrogen Fertilizer. The company has a P/E ratio of 30.77.

The average volume for CVR Energy has been 298,300 shares per day over the past 30 days. CVR Energy has a market cap of $3.6 billion and is part of the energy industry. Shares are up 12.8% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

CVR Energy

as a

buy

. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and growth in earnings per share. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

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 21.6% when compared to the same quarter one year prior, going from $83.70 million to $101.80 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.64, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, CVI has a quick ratio of 2.03, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has significantly increased by 59.58% to $198.20 million when compared to the same quarter last year. In addition, CVR ENERGY INC has also vastly surpassed the industry average cash flow growth rate of -19.46%.
  • CVR ENERGY INC has improved earnings per share by 21.9% 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, CVR ENERGY INC reported lower earnings of $2.00 versus $4.27 in the prior year. This year, the market expects an improvement in earnings ($2.59 versus $2.00).
  • CVI, with its decline in revenue, slightly underperformed the industry average of 34.1%. Since the same quarter one year prior, revenues fell by 36.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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