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."

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 10.48. Currently there are 3 analysts that rate Valassis Communications a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Valassis Communications has been 391,500 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 15.8% year to date as of the close of trading on Wednesday.

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:
  • 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. 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.
  • 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 ($3.40 versus $2.86).
  • VCI, with its decline in revenue, underperformed when compared the industry average of 8.5%. 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.

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Royal Dutch Shell

Dividend Yield: 5.10%

Royal Dutch Shell (NYSE: RDS.B) shares currently have a dividend yield of 5.10%.

Royal Dutch Shell plc operates as an independent oil and gas company worldwide. The company explores for and extracts crude oil, natural gas, and natural gas liquids. The company has a P/E ratio of 8.54.

The average volume for Royal Dutch Shell has been 1,147,000 shares per day over the past 30 days. Royal Dutch Shell has a market cap of $212.6 billion and is part of the energy industry. Shares are down 5.4% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates Royal Dutch Shell as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations and increase in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • RDS.B's revenue growth has slightly outpaced the industry average of 2.9%. Since the same quarter one year prior, revenues slightly increased by 2.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • RDS.B's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry average. The net income increased by 2.6% when compared to the same quarter one year prior, going from $6,500.00 million to $6,671.00 million.
  • Net operating cash flow has significantly increased by 53.33% to $9,913.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 29.14%.

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Spectra Energy

Dividend Yield: 4.10%

Spectra Energy (NYSE: SE) shares currently have a dividend yield of 4.10%.

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 20.92. 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 5,465,600 shares per day over the past 30 days. Spectra Energy has a market cap of $20.0 billion and is part of the energy industry. Shares are up 10.4% year to date as of the close of trading on Wednesday.

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 2.9%. 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 8.97% 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.

Integrys Energy Group

Dividend Yield: 4.80%

Integrys Energy Group (NYSE: TEG) shares currently have a dividend yield of 4.80%.

Integrys Energy Group, Inc., a diversified 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 15.52. 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 323,300 shares per day over the past 30 days. Integrys Energy Group has a market cap of $4.5 billion and is part of the utilities industry. Shares are up 9.9% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates Integrys Energy Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year, compelling growth in net income, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. 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.
  • 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. 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 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.

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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