4 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 4 stocks with substantial yields, that ultimately, we have rated "Buy."

PennyMac Mortgage Investment

Dividend Yield: 8.90%

PennyMac Mortgage Investment (NYSE: PMT) shares currently have a dividend yield of 8.90%.

PennyMac Mortgage Investment Trust, a specialty finance company, through its subsidiaries, invests primarily in residential mortgage loans and mortgage-related assets. The company operates in two segments, Correspondent Lending and Investment Activities. The company has a P/E ratio of 8.19. 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 1,092,500 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 1.3% year to date as of the close of trading on Wednesday.

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 36.14% 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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Digital Realty

Dividend Yield: 4.70%

Digital Realty (NYSE: DLR) shares currently have a dividend yield of 4.70%.

Digital Realty Trust, Inc., a real estate investment trust (REIT), through its controlling interest in Digital Realty Trust, L.P., engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate. The company has a P/E ratio of 45.32. Currently there are 8 analysts that rate Digital Realty a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for Digital Realty has been 1,393,300 shares per day over the past 30 days. Digital Realty has a market cap of $8.6 billion and is part of the real estate industry. Shares are down 1.3% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates Digital Realty as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels, good cash flow from operations, compelling growth in net income and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 16.4%. Since the same quarter one year prior, revenues rose by 29.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 19.4% when compared to the same quarter one year prior, going from $45.72 million to $54.57 million.
  • Net operating cash flow has significantly increased by 54.24% to $186.41 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 38.95%.
  • DIGITAL REALTY TRUST INC has improved earnings per share by 5.9% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, DIGITAL REALTY TRUST INC increased its bottom line by earning $1.47 versus $1.31 in the prior year. For the next year, the market is expecting a contraction of 0.7% in earnings ($1.46 versus $1.47).

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Energy Transfer Partners L.P

Dividend Yield: 7.20%

Energy Transfer Partners L.P (NYSE: ETP) shares currently have a dividend yield of 7.20%.

Energy Transfer Partners, L.P. engages in the natural gas midstream, and intrastate transportation and storage businesses in the United States. The company has a P/E ratio of 11.21. Currently there are 6 analysts that rate Energy Transfer Partners L.P a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Energy Transfer Partners L.P has been 1,560,300 shares per day over the past 30 days. Energy Transfer Partners L.P has a market cap of $15.1 billion and is part of the energy industry. Shares are up 16.2% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates Energy Transfer Partners L.P as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, attractive valuation levels, notable return on equity and impressive record of earnings per share growth. 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:
  • ETP's very impressive revenue growth greatly exceeded the industry average of 2.9%. Since the same quarter one year prior, revenues leaped by 508.4%. 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 49.0% when compared to the same quarter one year prior, rising from $206.00 million to $307.00 million.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, ENERGY TRANSFER PARTNERS -LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • ENERGY TRANSFER PARTNERS -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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ENERGY TRANSFER PARTNERS -LP increased its bottom line by earning $6.68 versus $2.17 in the prior year. For the next year, the market is expecting a contraction of 69.3% in earnings ($2.05 versus $6.68).

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.

El Paso Pipeline Partners

Dividend Yield: 5.60%

El Paso Pipeline Partners (NYSE: EPB) shares currently have a dividend yield of 5.60%.

El Paso Pipeline Partners, L.P. engages in the ownership and operation of interstate natural gas transportation and terminaling facilities in the United States. The company has a P/E ratio of 20.41. Currently there are 2 analysts that rate El Paso Pipeline Partners a buy, 1 analyst rates it a sell, and 8 rate it a hold.

The average volume for El Paso Pipeline Partners has been 480,500 shares per day over the past 30 days. El Paso Pipeline Partners has a market cap of $9.5 billion and is part of the energy industry. Shares are up 18.2% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates El Paso Pipeline Partners 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, solid stock price performance and increase 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:
  • EPB's revenue growth has slightly outpaced the industry average of 2.9%. Since the same quarter one year prior, revenues slightly increased by 0.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, EL PASO PIPELINE PARTNERS LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • The gross profit margin for EL PASO PIPELINE PARTNERS LP is currently very high, coming in at 74.90%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 45.64% significantly outperformed against the industry average.
  • 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 28.1% when compared to the same quarter one year prior, rising from $139.00 million to $178.00 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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