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."

PennyMac Mortgage Investment

Dividend Yield: 9.00%

PennyMac Mortgage Investment (NYSE: PMT) shares currently have a dividend yield of 9.00%.

PennyMac Mortgage Investment Trust, a specialty finance company, through its subsidiaries, invests primarily in residential mortgage loans and mortgage-related assets. PNMAC Capital Management, LLC acts as the manager of PennyMac Mortgage Investment Trust. The company has a P/E ratio of 8.09. Currently there are 5 analysts that rate PennyMac Mortgage Investment a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for PennyMac Mortgage Investment has been 1,072,300 shares per day over the past 30 days. PennyMac Mortgage Investment has a market cap of $1.5 billion and is part of the real estate industry. Shares are up 0.1% year to date as of the close of trading on Monday.

TheStreet Ratings rates PennyMac Mortgage Investment as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • PMT's very impressive revenue growth greatly exceeded the industry average of 16.4%. Since the same quarter one year prior, revenues leaped by 219.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 38.71% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, PMT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • PENNYMAC MORTGAGE INVEST TR has improved earnings per share by 18.6% 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, PENNYMAC MORTGAGE INVEST TR increased its bottom line by earning $3.08 versus $2.37 in the prior year. This year, the market expects an improvement in earnings ($3.45 versus $3.08).
  • 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 150.6% when compared to the same quarter one year prior, rising from $19.65 million to $49.24 million.

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Valassis Communications

Dividend Yield: 4.20%

Valassis Communications (NYSE: VCI) shares currently have a dividend yield of 4.20%.

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 10.43. Currently there are 3 analysts that rate Valassis Communications a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Valassis Communications has been 380,400 shares per day over the past 30 days. Valassis Communications has a market cap of $1.2 billion and is part of the media industry. Shares are up 15% year to date as of the close of trading on Monday.

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, growth in earnings per share, 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 has had sub par growth in net income.

Highlights from the ratings report include:
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 25.04% over the past year, a rise that has exceeded that of the S&P 500 Index. 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 11.8% 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 ($3.47 versus $2.86).
  • VCI, with its decline in revenue, underperformed when compared the industry average of 8.4%. Since the same quarter one year prior, revenues slightly dropped by 2.7%. 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 1.24, 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 1.16 is sturdy.

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.

HCP

Dividend Yield: 4.30%

HCP (NYSE: HCP) shares currently have a dividend yield of 4.30%.

HCP, Inc. is an independent hybrid real estate investment trust. The fund invests in real estate markets of the United States. The company has a P/E ratio of 26.60. Currently there are 4 analysts that rate HCP a buy, 2 analysts rate it a sell, and 10 rate it a hold.

The average volume for HCP has been 2,129,100 shares per day over the past 30 days. HCP has a market cap of $22.1 billion and is part of the real estate industry. Shares are up 7% year to date as of the close of trading on Monday.

TheStreet Ratings rates HCP 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, compelling growth in net income, revenue growth and good cash flow from operations. 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:
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. 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.
  • HCP INC reported significant earnings per share improvement 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, HCP INC increased its bottom line by earning $1.83 versus $1.27 in the prior year. This year, the market expects an improvement in earnings ($2.00 versus $1.83).
  • 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 255.3% when compared to the same quarter one year prior, rising from $67.84 million to $241.03 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 rose by 10.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has significantly increased by 128.73% to $313.92 million when compared to the same quarter last year. In addition, HCP INC has also vastly surpassed the industry average cash flow growth rate of 32.95%.

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.

Integrys Energy Group

Dividend Yield: 4.90%

Integrys Energy Group (NYSE: TEG) shares currently have a dividend yield of 4.90%.

Integrys Energy Group, Inc., an energy holding company, engages in natural gas and electric utility operations, and non regulated energy operations in the United States and Canada. The company has a P/E ratio of 15.26. Currently there is 1 analyst that rates Integrys Energy Group a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Integrys Energy Group has been 370,100 shares per day over the past 30 days. Integrys Energy Group has a market cap of $4.4 billion and is part of the utilities industry. Shares are up 6.9% year to date as of the close of trading on Monday.

TheStreet Ratings rates Integrys Energy Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, reasonable 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 weak operating cash flow.

Highlights from the ratings report include:
  • TEG's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 6.2%. 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 Multi-Utilities industry. The net income increased by 74.2% when compared to the same quarter one year prior, rising from $39.50 million to $68.80 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.89, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.29 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Multi-Utilities industry and the overall market on the basis of return on equity, INTEGRYS ENERGY GROUP INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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.

BCE

Dividend Yield: 4.90%

BCE (NYSE: BCE) shares currently have a dividend yield of 4.90%.

BCE Inc. provides wire line, wireless, Internet, and television (TV) services to residential, business, and wholesale customers primarily in Canada. The company has a P/E ratio of 13.41. Currently there are 3 analysts that rate BCE a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for BCE has been 887,300 shares per day over the past 30 days. BCE has a market cap of $35.6 billion and is part of the telecommunications industry. Shares are up 6% year to date as of the close of trading on Monday.

TheStreet Ratings rates BCE 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, compelling growth in net income, notable return on equity and good cash flow from operations. 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:
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
  • BCE INC has improved earnings per share by 46.8% 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. During the past fiscal year, BCE INC increased its bottom line by earning $3.39 versus $2.87 in the prior year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Telecommunication Services industry. The net income increased by 44.9% when compared to the same quarter one year prior, rising from $512.00 million to $742.00 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, BCE INC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • Net operating cash flow has slightly increased to $863.00 million or 2.98% when compared to the same quarter last year. Despite an increase in cash flow, BCE INC's cash flow growth rate is still lower than the industry average growth rate of 14.22%.

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.

Other helpful dividend tools from TheStreet:

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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