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."

Darden Restaurants

Dividend Yield: 4.10%

Darden Restaurants (NYSE: DRI) shares currently have a dividend yield of 4.10%.

Darden Restaurants, Inc. owns and operates full service restaurants in the United States and Canada. It operates restaurants under the Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze, Seasons 52, Eddie V's Prime Seafood, and Wildfish Seafood Grille brand names. The company has a P/E ratio of 14.01. Currently there are 8 analysts that rate Darden Restaurants a buy, 2 analysts rate it a sell, and 16 rate it a hold.

The average volume for Darden Restaurants has been 1,977,200 shares per day over the past 30 days. Darden Restaurants has a market cap of $6.3 billion and is part of the leisure industry. Shares are up 8% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Darden Restaurants as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • DRI's revenue growth has slightly outpaced the industry average of 2.8%. Since the same quarter one year prior, revenues slightly increased by 7.0%. 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 significantly increased by 137.27% to $14.20 million when compared to the same quarter last year. In addition, DARDEN RESTAURANTS INC has also vastly surpassed the industry average cash flow growth rate of -8.41%.
  • DARDEN RESTAURANTS INC's earnings per share declined by 36.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, DARDEN RESTAURANTS INC increased its bottom line by earning $3.59 versus $3.42 in the prior year. For the next year, the market is expecting a contraction of 12.3% in earnings ($3.15 versus $3.59).
  • The share price of DARDEN RESTAURANTS INC has not done very well: it is down 6.92% 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. 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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Liberty Property

Dividend Yield: 4.80%

Liberty Property (NYSE: LRY) shares currently have a dividend yield of 4.80%.

Liberty Property Trust is a publicly owned real estate investment holding trust. Through its subsidiary, it provides leasing, property management, development, acquisition, and other tenant-related services for a portfolio of industrial and office properties. The company has a P/E ratio of 37.35. Currently there are 3 analysts that rate Liberty Property a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Liberty Property has been 926,200 shares per day over the past 30 days. Liberty Property has a market cap of $4.7 billion and is part of the real estate industry. Shares are up 9.9% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Liberty Property as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, revenue growth, reasonable valuation levels 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 stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry average. The net income increased by 10.4% when compared to the same quarter one year prior, going from $34.79 million to $38.43 million.
  • LRY's revenue growth trails the industry average of 16.4%. Since the same quarter one year prior, revenues slightly increased by 4.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • LIBERTY PROPERTY TRUST's earnings per share improvement from the most recent quarter was slightly positive. 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, LIBERTY PROPERTY TRUST increased its bottom line by earning $1.05 versus $0.99 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus $1.05).

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.

AGL Resources

Dividend Yield: 4.60%

AGL Resources (NYSE: GAS) shares currently have a dividend yield of 4.60%.

AGL Resources Inc., an energy services holding company, distributes natural gas to residential, commercial, industrial, and governmental customers in Illinois, Georgia, Virginia, New Jersey, Florida, Tennessee, and Maryland. The company has a P/E ratio of 17.77. Currently there are 2 analysts that rate AGL Resources a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for AGL Resources has been 500,100 shares per day over the past 30 days. AGL Resources has a market cap of $4.8 billion and is part of the utilities industry. Shares are up 3% year to date as of the close of trading on Tuesday.

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

Highlights from the ratings report include:
  • GAS's very impressive revenue growth greatly exceeded the industry average of 3.7%. Since the same quarter one year prior, revenues leaped by 54.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • AGL RESOURCES 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 year. We feel that this trend should continue. During the past fiscal year, AGL RESOURCES INC increased its bottom line by earning $2.31 versus $2.15 in the prior year. This year, the market expects an improvement in earnings ($2.64 versus $2.31).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Gas Utilities industry. The net income increased by 197.0% when compared to the same quarter one year prior, rising from $33.00 million to $98.00 million.
  • Net operating cash flow has significantly increased by 80.73% to -$21.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 38.61%.

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.

Realty Income Corporation

Dividend Yield: 4.90%

Realty Income Corporation (NYSE: O) shares currently have a dividend yield of 4.90%.

Realty Income Corporation engages in the acquisition and ownership of commercial retail real estate properties in the United States. The company leases its retail properties primarily to regional and national retail chain store operators. The company has a P/E ratio of 51.67. Currently there are 4 analysts that rate Realty Income Corporation a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Realty Income Corporation has been 1,997,400 shares per day over the past 30 days. Realty Income Corporation has a market cap of $8.0 billion and is part of the real estate industry. Shares are up 9.5% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Realty Income Corporation as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • O's revenue growth has slightly outpaced the industry average of 16.4%. Since the same quarter one year prior, revenues rose by 16.4%. 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.
  • 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, despite 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.
  • Net operating cash flow has increased to $117.94 million or 18.28% when compared to the same quarter last year. Despite an increase in cash flow, REALTY INCOME CORP's cash flow growth rate is still lower than the industry average growth rate of 32.95%.
  • The gross profit margin for REALTY INCOME CORP is rather high; currently it is at 56.20%. Regardless of O's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, O's net profit margin of 29.98% compares favorably to the industry average.
  • REALTY INCOME CORP's earnings per share declined by 24.0% 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, REALTY INCOME CORP reported lower earnings of $0.76 versus $0.96 in the prior year. This year, the market expects an improvement in earnings ($1.06 versus $0.76).

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.

KKR

Dividend Yield: 14.50%

KKR (NYSE: KKR) shares currently have a dividend yield of 14.50%.

Kohlberg Kravis Roberts & Co. is a private equity investment firm specializing in acquisitions, leveraged buyouts, management buyouts, special situations, growth equity, mature, and middle market investments. The company has a P/E ratio of 8.75. Currently there are 10 analysts that rate KKR a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for KKR has been 2,644,300 shares per day over the past 30 days. KKR has a market cap of $5.0 billion and is part of the financial services industry. Shares are up 22.7% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates KKR as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. 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:
  • KKR's very impressive revenue growth greatly exceeded the industry average of 10.4%. Since the same quarter one year prior, revenues leaped by 121.8%. Growth in the company's revenue appears to have helped boost the 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 Capital Markets industry and the overall market, KKR & CO LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Powered by its strong earnings growth of 80.00% and other important driving factors, this stock has surged by 34.89% 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.
  • KKR & CO LP 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 year. We feel that this trend should continue. During the past fiscal year, KKR & CO LP increased its bottom line by earning $2.23 versus $0.04 in the prior year. This year, the market expects an improvement in earnings ($2.30 versus $2.23).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 109.7% when compared to the same quarter one year prior, rising from $46.14 million to $96.73 million.

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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