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."

Apollo Commercial Real Estate Finance

Dividend Yield: 9.10%

Apollo Commercial Real Estate Finance (NYSE: ARI) shares currently have a dividend yield of 9.10%.

Apollo Commercial Real Estate Finance, Inc. operates as a commercial real estate finance company in the United States. The company has a P/E ratio of 10.73. Currently there are 5 analysts that rate Apollo Commercial Real Estate Finance a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Apollo Commercial Real Estate Finance has been 536,700 shares per day over the past 30 days. Apollo Commercial Real Estate Finance has a market cap of $493.6 million and is part of the real estate industry. Shares are up 8.4% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Apollo Commercial Real Estate Finance as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins, solid stock price performance and increase 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:
  • The gross profit margin for APOLLO COMMERCIAL RE FIN INC is currently very high, coming in at 75.60%. Regardless of ARI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ARI's net profit margin of 65.11% significantly outperformed against the industry.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of 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.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 3.4% when compared to the same quarter one year prior, going from $8.67 million to $8.97 million.
  • ARI, with its decline in revenue, underperformed when compared the industry average of 16.4%. Since the same quarter one year prior, revenues slightly dropped by 5.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • APOLLO COMMERCIAL RE FIN INC's earnings per share declined by 35.0% 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, APOLLO COMMERCIAL RE FIN INC increased its bottom line by earning $1.68 versus $1.34 in the prior year. For the next year, the market is expecting a contraction of 4.8% in earnings ($1.60 versus $1.68).

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.

Legacy Reserves

Dividend Yield: 8.30%

Legacy Reserves (NASDAQ: LGCY) shares currently have a dividend yield of 8.30%.

Legacy Reserves LP, an independent oil and natural gas limited partnership, engages in the acquisition and development of oil and natural gas properties primarily located in the Permian Basin, Mid-Continent, and Rocky Mountain regions of the United States. The company has a P/E ratio of 19.73. Currently there are 9 analysts that rate Legacy Reserves a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Legacy Reserves has been 323,500 shares per day over the past 30 days. Legacy Reserves has a market cap of $1.6 billion and is part of the energy industry. Shares are up 16% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Legacy Reserves as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, expanding profit margins and growth in earnings per share. 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:
  • LGCY's very impressive revenue growth greatly exceeded the industry average of 1.7%. Since the same quarter one year prior, revenues leaped by 264.6%. 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 103.2% when compared to the same quarter one year prior, rising from -$58.52 million to $1.87 million.
  • 46.10% is the gross profit margin for LEGACY RESERVES LP which we consider to be strong. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 1.97% trails the industry average.
  • LEGACY RESERVES LP reported significant earnings per share improvement 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, LEGACY RESERVES LP reported lower earnings of $1.43 versus $1.71 in the prior year. This year, the market expects an improvement in earnings ($1.46 versus $1.43).
  • In its most recent trading session, LGCY 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 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.

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.

Vector Group

Dividend Yield: 9.90%

Vector Group (NYSE: VGR) shares currently have a dividend yield of 9.90%.

Vector Group Ltd., through its subsidiaries, engages in the manufacture and sale of cigarettes in the United States. The company has a P/E ratio of 46.06. Currently there are no analysts that rate Vector Group a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Vector Group has been 503,400 shares per day over the past 30 days. Vector Group has a market cap of $1.4 billion and is part of the tobacco industry. Shares are up 8.4% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Vector Group as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, good cash flow from operations, expanding profit margins 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:
  • VECTOR GROUP LTD has improved earnings per share by 5.0% 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, VECTOR GROUP LTD increased its bottom line by earning $0.82 versus $0.56 in the prior year.
  • Net operating cash flow has increased to $39.42 million or 43.70% when compared to the same quarter last year. In addition, VECTOR GROUP LTD has also vastly surpassed the industry average cash flow growth rate of -71.76%.
  • 49.00% is the gross profit margin for VECTOR GROUP LTD which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, VGR's net profit margin of 12.24% significantly trails the industry average.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Tobacco industry average. The net income increased by 2.2% when compared to the same quarter one year prior, going from $17.55 million to $17.93 million.
  • VGR, with its decline in revenue, slightly underperformed the industry average of 0.7%. Since the same quarter one year prior, revenues slightly dropped by 0.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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.

Pioneer Southwest Energy Partners

Dividend Yield: 8.50%

Pioneer Southwest Energy Partners (NYSE: PSE) shares currently have a dividend yield of 8.50%.

Pioneer Southwest Energy Partners L.P. owns, acquires, explores, and develops oil and gas properties in the United States. It produces oil, natural gas liquids, and gas in onshore Texas and eight counties in the southeast region of New Mexico. The company has a P/E ratio of 8.14. Currently there is 1 analyst that rates Pioneer Southwest Energy Partners a buy, 2 analysts rate it a sell, and 3 rate it a hold.

The average volume for Pioneer Southwest Energy Partners has been 156,400 shares per day over the past 30 days. Pioneer Southwest Energy Partners has a market cap of $872.5 million and is part of the energy industry. Shares are up 7.6% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Pioneer Southwest Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, expanding profit margins 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:
  • 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 437.2% when compared to the same quarter one year prior, rising from -$6.88 million to $23.21 million.
  • The gross profit margin for PIONEER SOUTHWEST ENERGY -LP is rather high; currently it is at 62.00%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, PSE's net profit margin of 50.24% significantly outperformed against the industry.
  • PSE, with its decline in revenue, underperformed when compared the industry average of 1.7%. Since the same quarter one year prior, revenues fell by 14.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PIONEER SOUTHWEST ENERGY -LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • PIONEER SOUTHWEST ENERGY -LP reported significant earnings per share improvement 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, PIONEER SOUTHWEST ENERGY -LP reported lower earnings of $3.00 versus $3.69 in the prior year. For the next year, the market is expecting a contraction of 27.0% in earnings ($2.19 versus $3.00).

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.
null