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."

Lorillard

Dividend Yield: 5.40%

Lorillard (NYSE: LO) shares currently have a dividend yield of 5.40%.

Lorillard, Inc. manufactures and sells cigarettes in the United States. The company operates through two segments, Cigarettes and Electronic Cigarettes. The Cigarettes segment manufactures and sells cigarettes. The company has a P/E ratio of 14.62. Currently there are 4 analysts that rate Lorillard a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Lorillard has been 3,581,000 shares per day over the past 30 days. Lorillard has a market cap of $15.6 billion and is part of the tobacco industry. Shares are up 4.3% year to date as of the close of trading on Friday.

TheStreet Ratings rates Lorillard as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • LO's revenue growth has slightly outpaced the industry average of 7.4%. Since the same quarter one year prior, revenues slightly increased by 7.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • LORILLARD INC'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, LORILLARD INC increased its bottom line by earning $2.81 versus $2.67 in the prior year. This year, the market expects an improvement in earnings ($3.09 versus $2.81).
  • Net operating cash flow has slightly increased to $529.00 million or 7.73% when compared to the same quarter last year. Despite an increase in cash flow of 7.73%, LORILLARD INC is still growing at a significantly lower rate than the industry average of 67.68%.
  • The gross profit margin for LORILLARD INC is rather high; currently it is at 54.10%. Regardless of LO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LO's net profit margin of 25.57% compares favorably to the industry average.
  • LO has underperformed the S&P 500 Index, declining 9.11% from its price level of one year ago. 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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Kinder Morgan Energy Partners

Dividend Yield: 5.90%

Kinder Morgan Energy Partners (NYSE: KMP) shares currently have a dividend yield of 5.90%.

Kinder Morgan Energy Partners, L.P. operates as a pipeline transportation and energy storage company in North America. The company has a P/E ratio of 53.78. Currently there are 4 analysts that rate Kinder Morgan Energy Partners a buy, no analysts rate it a sell, and 11 rate it a hold.

The average volume for Kinder Morgan Energy Partners has been 933,600 shares per day over the past 30 days. Kinder Morgan Energy Partners has a market cap of $22.3 billion and is part of the energy industry. Shares are up 10.4% year to date as of the close of trading on Friday.

TheStreet Ratings rates Kinder Morgan Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, increase in net income, expanding profit margins and increase in stock price during the past year. 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:
  • The revenue growth greatly exceeded the industry average of 1.3%. Since the same quarter one year prior, revenues rose by 30.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • KINDER MORGAN ENERGY -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. We feel that this trend should continue. During the past fiscal year, KINDER MORGAN ENERGY -LP turned its bottom line around by earning $1.64 versus -$0.33 in the prior year. This year, the market expects an improvement in earnings ($2.63 versus $1.64).
  • 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 29.3% when compared to the same quarter one year prior, rising from $475.00 million to $614.00 million.
  • 42.40% is the gross profit margin for KINDER MORGAN ENERGY -LP which we consider to be strong. Regardless of KMP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, KMP's net profit margin of 24.46% significantly outperformed against the industry.
  • 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. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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.

Eni SpA

Dividend Yield: 4.90%

Eni SpA (NYSE: E) shares currently have a dividend yield of 4.90%.

Eni SpA, an integrated energy company, engages in the exploration, production, transportation, transformation, and marketing of oil and natural gas. The company has a P/E ratio of 4.66. Currently there are 6 analysts that rate Eni SpA a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Eni SpA has been 730,700 shares per day over the past 30 days. Eni SpA has a market cap of $82.5 billion and is part of the energy industry. Shares are down 7% year to date as of the close of trading on Friday.

TheStreet Ratings rates Eni SpA as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and attractive valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 6.9%. Since the same quarter one year prior, revenues rose by 42.8%. 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. 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.
  • ENI SPA 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. We feel that this trend should continue. During the past fiscal year, ENI SPA increased its bottom line by earning $4.91 versus $4.62 in the prior year. This year, the market expects an improvement in earnings ($5.19 versus $4.91).
  • 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 65.5% when compared to the same quarter one year prior, rising from $1,972.25 million to $3,264.41 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.

Buckeye Partners L.P

Dividend Yield: 7.00%

Buckeye Partners L.P (NYSE: BPL) shares currently have a dividend yield of 7.00%.

Buckeye Partners, L.P. owns and operates refined petroleum products pipeline systems in the United States. Its Pipelines & Terminals segment transports refined petroleum products; and provides bulk storage and terminal throughput services in the continental United States. The company has a P/E ratio of 25.44. Currently there are 4 analysts that rate Buckeye Partners L.P a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for Buckeye Partners L.P has been 590,000 shares per day over the past 30 days. Buckeye Partners L.P has a market cap of $5.7 billion and is part of the energy industry. Shares are up 30.1% year to date as of the close of trading on Friday.

TheStreet Ratings rates Buckeye Partners L.P as a buy. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • BUCKEYE PARTNERS LP's earnings per share declined by 45.3% 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, BUCKEYE PARTNERS LP increased its bottom line by earning $2.31 versus $1.25 in the prior year. This year, the market expects an improvement in earnings ($3.28 versus $2.31).
  • BPL, with its decline in revenue, underperformed when compared the industry average of 1.3%. Since the same quarter one year prior, revenues fell by 12.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, BUCKEYE PARTNERS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for BUCKEYE PARTNERS LP is rather low; currently it is at 15.90%. Regardless of BPL'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 3.04% trails the industry average.
  • In its most recent trading session, BPL 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.

PPL

Dividend Yield: 4.70%

PPL (NYSE: PPL) shares currently have a dividend yield of 4.70%.

PPL Corporation, an energy and utility holding company, engages in the generation, transmission, distribution, and sale of electricity to wholesale and retail customers in the United States and the United Kingdom. The company operates in four segments: Kentucky Regulated, U.K. The company has a P/E ratio of 11.99. Currently there are 3 analysts that rate PPL a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for PPL has been 4,105,000 shares per day over the past 30 days. PPL has a market cap of $18.2 billion and is part of the utilities industry. Shares are up 9.8% year to date as of the close of trading on Friday.

TheStreet Ratings rates PPL as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations and solid stock price performance. 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:
  • 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. Compared to other companies in the Electric Utilities industry and the overall market, PPL CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has slightly increased to $670.00 million or 1.36% when compared to the same quarter last year. Despite an increase in cash flow, PPL CORP's average is still marginally south of the industry average growth rate of 5.09%.
  • 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 revenue fell significantly faster than the industry average of 13.1%. Since the same quarter one year prior, revenues fell by 25.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for PPL CORP is currently lower than what is desirable, coming in at 32.50%. Regardless of PPL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, PPL's net profit margin of 11.48% compares favorably to the industry average.

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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