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."

Annaly Capital Management

Dividend Yield: 11.30%

Annaly Capital Management (NYSE: NLY) shares currently have a dividend yield of 11.30%.

Annaly Capital Management, Inc. owns, manages, and finances a portfolio of real estate related investments in United States. The company has a P/E ratio of 9.29. Currently there are 3 analysts that rate Annaly Capital Management a buy, 2 analysts rate it a sell, and 10 rate it a hold.

The average volume for Annaly Capital Management has been 9,132,300 shares per day over the past 30 days. Annaly Capital Management has a market cap of $15.1 billion and is part of the real estate industry. Shares are up 12.8% year to date as of the close of trading on Monday.

TheStreet Ratings rates Annaly Capital Management as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, attractive valuation levels, expanding profit margins, good cash flow from operations and notable return on equity. 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:
  • 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 57.2% when compared to the same quarter one year prior, rising from $445.56 million to $700.50 million.
  • The gross profit margin for ANNALY CAPITAL MANAGEMENT is currently very high, coming in at 95.60%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 76.74% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 121.67% to $352.76 million when compared to the same quarter last year. In addition, ANNALY CAPITAL MANAGEMENT has also vastly surpassed the industry average cash flow growth rate of 38.95%.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ANNALY CAPITAL MANAGEMENT has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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Enbridge Energy Partners

Dividend Yield: 7.20%

Enbridge Energy Partners (NYSE: EEP) shares currently have a dividend yield of 7.20%.

Enbridge Energy Partners, L.P. owns and operates crude oil and liquid petroleum transportation and storage assets; and natural gas gathering, treating, processing, transportation, and marketing assets in the United States. The company has a P/E ratio of 23.73. Currently there are 4 analysts that rate Enbridge Energy Partners a buy, 1 analyst rates it a sell, and 8 rate it a hold.

The average volume for Enbridge Energy Partners has been 1,015,100 shares per day over the past 30 days. Enbridge Energy Partners has a market cap of $7.7 billion and is part of the energy industry. Shares are up 7.9% year to date as of the close of trading on Monday.

TheStreet Ratings rates Enbridge Energy Partners as a buy. Among the primary strengths of the company is its reasonable valuation levels, considering its current price compared to earnings, book value and other measures. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:
  • EEP, with its decline in revenue, underperformed when compared the industry average of 1.7%. Since the same quarter one year prior, revenues fell by 14.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for ENBRIDGE ENERGY PRTNRS -LP is currently lower than what is desirable, coming in at 27.60%. Regardless of EEP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.06% trails the industry average.
  • In its most recent trading session, EEP 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.
  • ENBRIDGE ENERGY PRTNRS -LP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, ENBRIDGE ENERGY PRTNRS -LP reported lower earnings of $1.25 versus $1.89 in the prior year. For the next year, the market is expecting a contraction of 24.0% in earnings ($0.95 versus $1.25).

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.

Ecopetrol S.A

Dividend Yield: 5.20%

Ecopetrol S.A (NYSE: EC) shares currently have a dividend yield of 5.20%.

Ecopetrol S.A., an integrated oil company, engages in the exploration, development, and production of crude oil and natural gas. As of December 31, 2011, its proved reserves of crude oil and natural gas totaled 1,856.7 million barrels of oil equivalent. The company has a P/E ratio of 9.09. Currently there are no analysts that rate Ecopetrol S.A a buy, 3 analysts rate it a sell, and 2 rate it a hold.

The average volume for Ecopetrol S.A has been 485,600 shares per day over the past 30 days. Ecopetrol S.A has a market cap of $112.1 billion and is part of the energy industry. Shares are down 8.7% year to date as of the close of trading on Monday.

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

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 1.7%. Since the same quarter one year prior, revenues rose by 15.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 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 0.8% when compared to the same quarter one year prior, going from $2,202.93 million to $2,220.02 million.
  • Net operating cash flow has significantly increased by 53.01% to $4,898.80 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 20.23%.
  • 42.60% is the gross profit margin for ECOPETROL SA which we consider to be strong. Regardless of EC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EC's net profit margin of 20.48% significantly outperformed against the industry.
  • EC's debt-to-equity ratio is very low at 0.21 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that EC's debt-to-equity ratio is low, the quick ratio, which is currently 0.63, displays a potential problem in covering short-term cash needs.

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.

Royal Dutch Shell

Dividend Yield: 4.50%

Royal Dutch Shell (NYSE: RDS.A) shares currently have a dividend yield of 4.50%.

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 8.25.

The average volume for Royal Dutch Shell has been 2,682,700 shares per day over the past 30 days. Royal Dutch Shell has a market cap of $205.4 billion and is part of the energy industry. Shares are down 5.7% year to date as of the close of trading on Monday.

TheStreet Ratings rates Royal Dutch Shell as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, good cash flow from operations, increase in net income and largely solid financial position with reasonable debt levels by most measures. 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.A's revenue growth has slightly outpaced the industry average of 1.7%. 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.
  • 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 20.23%.
  • RDS.A'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. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.74 is somewhat weak and could be cause for future problems.

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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