3 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 3 stocks with substantial yields, that ultimately, we have rated "Buy."

HCP

Dividend Yield: 4.10%

HCP (NYSE: HCP) shares currently have a dividend yield of 4.10%.

HCP, Inc. is an independent hybrid real estate investment trust. The fund invests in real estate markets of the United States. The company has a P/E ratio of 28.12.

The average volume for HCP has been 2,191,000 shares per day over the past 30 days. HCP has a market cap of $23.4 billion and is part of the real estate industry. Shares are up 15.2% year to date as of the close of trading on Friday.

TheStreet Ratings rates HCP as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • Powered by its strong earnings growth of 235.71% and other important driving factors, this stock has surged by 31.08% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HCP should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • HCP INC 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, HCP INC increased its bottom line by earning $1.83 versus $1.27 in the prior year. This year, the market expects an improvement in earnings ($2.00 versus $1.83).
  • 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 255.3% when compared to the same quarter one year prior, rising from $67.84 million to $241.03 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 16.4%. Since the same quarter one year prior, revenues rose by 10.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has significantly increased by 128.73% to $313.92 million when compared to the same quarter last year. In addition, HCP INC has also vastly surpassed the industry average cash flow growth rate of 38.81%.

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.

Blackstone Group

Dividend Yield: 8.00%

Blackstone Group (NYSE: BX) shares currently have a dividend yield of 8.00%.

The Blackstone Group L.P., together with its subsidiaries, provides alternative asset management and financial advisory services worldwide. It operates in five segments: Private Equity, Real Estate, Hedge Fund Solutions, Credit Businesses, and Financial Advisory. The company has a P/E ratio of 51.46.

The average volume for Blackstone Group has been 5,305,200 shares per day over the past 30 days. Blackstone Group has a market cap of $11.7 billion and is part of the financial services industry. Shares are up 36.1% year to date as of the close of trading on Friday.

TheStreet Ratings rates Blackstone Group as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, solid stock price performance 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 revenue growth came in higher than the industry average of 10.4%. Since the same quarter one year prior, revenues rose by 33.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • BLACKSTONE GROUP 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, BLACKSTONE GROUP LP turned its bottom line around by earning $0.40 versus -$0.33 in the prior year. This year, the market expects an improvement in earnings ($2.26 versus $0.40).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 569.3% when compared to the same quarter one year prior, rising from -$22.68 million to $106.41 million.
  • Powered by its strong earnings growth of 575.00% and other important driving factors, this stock has surged by 44.22% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Capital Markets industry and the overall market, BLACKSTONE GROUP LP's return on equity is below that of both the industry average and the S&P 500.

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.

Lexington Realty

Dividend Yield: 4.90%

Lexington Realty (NYSE: LXP) shares currently have a dividend yield of 4.90%.

Lexington Corporate Properties Trust operates as a self-managed and self-administered real estate investment trust (REIT). The company acquires, owns, and manages a portfolio of office, industrial, and retail properties net-leased to corporate tenants in the United States. The company has a P/E ratio of 13.36.

The average volume for Lexington Realty has been 2,122,400 shares per day over the past 30 days. Lexington Realty has a market cap of $2.3 billion and is part of the real estate industry. Shares are up 16.4% year to date as of the close of trading on Friday.

TheStreet Ratings rates Lexington Realty as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, reasonable valuation levels 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:
  • Compared to its closing price of one year ago, LXP's share price has jumped by 32.32%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, LXP should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 16.4%. Since the same quarter one year prior, revenues slightly increased by 7.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, LEXINGTON REALTY TRUST has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • LEXINGTON REALTY TRUST 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. 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, LEXINGTON REALTY TRUST turned its bottom line around by earning $0.87 versus -$0.29 in the prior year. For the next year, the market is expecting a contraction of 93.1% in earnings ($0.06 versus $0.87).

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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