5 Buy-Rated Dividend Stocks

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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

GlaxoSmithKline

Dividend Yield: 6.10%

GlaxoSmithKline (NYSE: GSK) shares currently have a dividend yield of 6.10%.

GlaxoSmithKline plc, together with its subsidiaries, discovers, develops, manufactures, and markets pharmaceutical products, over-the-counter medicines, and health-related consumer products worldwide. The company has a P/E ratio of 13.64. Currently there are 2 analysts that rate GlaxoSmithKline a buy, 1 analyst rates it a sell, and 8 rate it a hold.

The average volume for GlaxoSmithKline has been 2,328,400 shares per day over the past 30 days. GlaxoSmithKline has a market cap of $122.3 billion and is part of the drugs industry. Shares are up 3.8% year to date as of the close of trading on Monday.

TheStreet Ratings rates GlaxoSmithKline as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • GSK's revenue growth has slightly outpaced the industry average of 8.3%. Since the same quarter one year prior, revenues rose by 11.4%. 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. Compared to other companies in the Pharmaceuticals industry and the overall market, GLAXOSMITHKLINE PLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for GLAXOSMITHKLINE PLC is currently very high, coming in at 73.20%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 11.98% trails the industry average.
  • GLAXOSMITHKLINE PLC's earnings per share declined by 22.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, GLAXOSMITHKLINE PLC reported lower earnings of $2.97 versus $3.21 in the prior year. This year, the market expects an improvement in earnings ($3.58 versus $2.97).
  • In its most recent trading session, GSK has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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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Geo Group

Dividend Yield: 5.60%

Geo Group (NYSE: GEO) shares currently have a dividend yield of 5.60%.

The GEO Group, Inc. provides government-outsourced services specializing in the management of correctional, detention, and re-entry facilities, and the provision of community based services and youth services in the United States, Australia, South Africa, the United Kingdom, and Canada. The company has a P/E ratio of 15.09. Currently there are 4 analysts that rate Geo Group a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Geo Group has been 1,104,400 shares per day over the past 30 days. Geo Group has a market cap of $2.6 billion and is part of the diversified services industry. Shares are up 26.3% year to date as of the close of trading on Monday.

TheStreet Ratings rates Geo Group as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, notable return on equity, attractive valuation levels and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins.

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 Real Estate Investment Trusts (REITs) industry. The net income increased by 335.5% when compared to the same quarter one year prior, rising from $18.74 million to $81.61 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 16.4%. Since the same quarter one year prior, revenues slightly increased by 6.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, GEO GROUP INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Powered by its strong earnings growth of 453.57% and other important driving factors, this stock has surged by 102.60% 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, GEO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

Calumet Specialty Products Partners

Dividend Yield: 6.70%

Calumet Specialty Products Partners (NASDAQ: CLMT) shares currently have a dividend yield of 6.70%.

Calumet Specialty Products Partners, L.P. produces and sells specialty hydrocarbon and fuel products in North America. It operates in two segments, Specialty Products and Fuel Products. The company has a P/E ratio of 11.12. Currently there is 1 analyst that rates Calumet Specialty Products Partners a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Calumet Specialty Products Partners has been 586,200 shares per day over the past 30 days. Calumet Specialty Products Partners has a market cap of $2.5 billion and is part of the energy industry. Shares are up 25.7% year to date as of the close of trading on Monday.

TheStreet Ratings rates Calumet Specialty Products Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, attractive valuation levels, good cash flow from operations and compelling growth in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 19.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 43.13% and other important driving factors, this stock has surged by 58.51% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • 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 70.2% when compared to the same quarter one year prior, rising from $26.87 million to $45.74 million.
  • Net operating cash flow has increased to $90.67 million or 40.92% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 28.97%.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

Total

Dividend Yield: 5.40%

Total (NYSE: TOT) shares currently have a dividend yield of 5.40%.

TOTAL S.A., together with its subsidiaries, operates as an integrated oil and gas company worldwide. The company operates in three segments: Upstream, Downstream, and Chemicals. The company has a P/E ratio of 7.16. Currently there are 4 analysts that rate Total a buy, 2 analysts rate it a sell, and 1 rates it a hold.

The average volume for Total has been 1,526,000 shares per day over the past 30 days. Total has a market cap of $114.7 billion and is part of the energy industry. Shares are down 3.9% year to date as of the close of trading on Monday.

TheStreet Ratings rates Total as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, attractive valuation levels, good cash flow from operations and growth in earnings per share. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 29.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 36.8% when compared to the same quarter one year prior, rising from $2,495.48 million to $3,413.92 million.
  • Net operating cash flow has significantly increased by 192.85% to $8,281.29 million when compared to the same quarter last year. In addition, TOTAL SA has also vastly surpassed the industry average cash flow growth rate of 28.97%.
  • TOTAL SA has improved earnings per share by 35.5% 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, TOTAL SA reported lower earnings of $6.22 versus $7.05 in the prior year. This year, the market expects an improvement in earnings ($6.98 versus $6.22).

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

Spectra Energy

Dividend Yield: 4.20%

Spectra Energy (NYSE: SE) shares currently have a dividend yield of 4.20%.

Spectra Energy Corp, through its subsidiaries, owns and operates a portfolio of natural gas-related energy assets in North America. The company's U.S. The company has a P/E ratio of 20.24. Currently there are 5 analysts that rate Spectra Energy a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Spectra Energy has been 5,483,900 shares per day over the past 30 days. Spectra Energy has a market cap of $19.3 billion and is part of the energy industry. Shares are up 5% year to date as of the close of trading on Monday.

TheStreet Ratings rates Spectra Energy as a buy. Among the primary strengths of the company is its expanding profit margins over time. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • 40.80% is the gross profit margin for SPECTRA ENERGY CORP which we consider to be strong. Regardless of SE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SE's net profit margin of 15.81% compares favorably to the industry average.
  • SPECTRA ENERGY CORP's earnings per share declined by 27.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, SPECTRA ENERGY CORP reported lower earnings of $1.43 versus $1.78 in the prior year. This year, the market expects an improvement in earnings ($1.52 versus $1.43).
  • SE, with its decline in revenue, slightly underperformed the industry average of 3.0%. Since the same quarter one year prior, revenues slightly dropped by 5.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The share price of SPECTRA ENERGY CORP has not done very well: it is down 9.86% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when 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 is one of the factors that makes this stock an attractive investment.
  • Net operating cash flow has declined marginally to $484.00 million or 3.00% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

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Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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