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."

Geo Group

Dividend Yield: 5.40%

Geo Group (NYSE: GEO) shares currently have a dividend yield of 5.40%.

The GEO Group, Inc. provides government-outsourced services specializing in the management of correctional, detention, and re-entry facilities, and the provision of community based services and youth services in the United States, Australia, South Africa, the United Kingdom, and Canada. The company has a P/E ratio of 15.76.

The average volume for Geo Group has been 992,000 shares per day over the past 30 days. Geo Group has a market cap of $2.7 billion and is part of the diversified services industry. Shares are up 33.7% year to date as of the close of trading on Friday.

TheStreet Ratings rates Geo Group as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, notable return on equity, attractive valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins.

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 335.5% when compared to the same quarter one year prior, rising from $18.74 million to $81.61 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 slightly increased by 6.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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, GEO GROUP INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Powered by its strong earnings growth of 453.57% and other important driving factors, this stock has surged by 79.01% 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, GEO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.

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.

Textainer Group Holdings

Dividend Yield: 4.60%

Textainer Group Holdings (NYSE: TGH) shares currently have a dividend yield of 4.60%.

Textainer Group Holdings Limited, through its subsidiaries, engages in the purchase, ownership, management, leasing, and resale of a fleet of marine cargo containers worldwide. The company operates in three segments: Container Ownership, Container Management, and Container Resale. The company has a P/E ratio of 9.97.

The average volume for Textainer Group Holdings has been 265,500 shares per day over the past 30 days. Textainer Group Holdings has a market cap of $2.2 billion and is part of the diversified services industry. Shares are up 26.4% year to date as of the close of trading on Friday.

TheStreet Ratings rates Textainer Group Holdings as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, increase in net income, solid stock price performance and good cash flow from operations. 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:
  • TGH's revenue growth has slightly outpaced the industry average of 4.4%. Since the same quarter one year prior, revenues slightly increased by 9.4%. 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 net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Trading Companies & Distributors industry average. The net income increased by 10.3% when compared to the same quarter one year prior, going from $54.92 million to $60.57 million.
  • The gross profit margin for TEXTAINER GROUP HOLDINGS LTD is currently very high, coming in at 86.70%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 47.58% significantly outperformed against the industry average.
  • TEXTAINER GROUP HOLDINGS LTD' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, TEXTAINER GROUP HOLDINGS LTD increased its bottom line by earning $3.96 versus $3.80 in the prior year. This year, the market expects an improvement in earnings ($4.01 versus $3.96).
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite 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.

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.

EPR Properties

Dividend Yield: 5.90%

EPR Properties (NYSE: EPR) shares currently have a dividend yield of 5.90%.

EPR Properties, a real estate investment trust (REIT), develops, owns, leases, and finances entertainment and related properties in the United States and Canada. Its properties include megaplex theatres, entertainment retail centers, and destination recreational and specialty properties. The company has a P/E ratio of 23.78.

The average volume for EPR Properties has been 293,000 shares per day over the past 30 days. EPR Properties has a market cap of $2.5 billion and is part of the real estate industry. Shares are up 18.3% year to date as of the close of trading on Friday.

TheStreet Ratings rates EPR Properties as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, solid stock price performance 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:
  • 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 7.8%. 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.
  • Net operating cash flow has slightly increased to $61.85 million or 2.49% when compared to the same quarter last year. Despite an increase in cash flow, EPR PROPERTIES's cash flow growth rate is still lower than the industry average growth rate of 38.58%.
  • 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.
  • EPR PROPERTIES's earnings per share declined by 33.8% 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, EPR PROPERTIES increased its bottom line by earning $2.24 versus $1.62 in the prior year. This year, the market expects an improvement in earnings ($2.72 versus $2.24).

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.

Firstmerit

Dividend Yield: 4.10%

Firstmerit (NASDAQ: FMER) shares currently have a dividend yield of 4.10%.

FirstMerit Corporation operates as a bank holding company for FirstMerit Bank, N.A. that provides various banking, fiduciary, financial, insurance, and investment services to corporate, institutional, and individual customers. The company has a P/E ratio of 12.86.

The average volume for Firstmerit has been 1,486,300 shares per day over the past 30 days. Firstmerit has a market cap of $1.7 billion and is part of the banking industry. Shares are up 10.6% year to date as of the close of trading on Friday.

TheStreet Ratings rates Firstmerit as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, expanding profit margins, attractive valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • FIRSTMERIT CORP has improved earnings per share by 25.0% 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. We feel that this trend should continue. During the past fiscal year, FIRSTMERIT CORP increased its bottom line by earning $1.23 versus $1.09 in the prior year. This year, the market expects an improvement in earnings ($1.26 versus $1.23).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Commercial Banks industry average. The net income increased by 25.3% when compared to the same quarter one year prior, rising from $30.50 million to $38.22 million.
  • The gross profit margin for FIRSTMERIT CORP is currently very high, coming in at 88.60%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 20.43% is above that of the industry average.
  • FMER, with its decline in revenue, slightly underperformed the industry average of 1.6%. Since the same quarter one year prior, revenues slightly dropped by 2.6%. 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.

Hospitality Properties

Dividend Yield: 6.80%

Hospitality Properties (NYSE: HPT) shares currently have a dividend yield of 6.80%.

Hospitality Properties Trust, a real estate investment trust (REIT), engages in buying, owning, and leasing hotels. The company has a P/E ratio of 32.82.

The average volume for Hospitality Properties has been 1,327,000 shares per day over the past 30 days. Hospitality Properties has a market cap of $3.4 billion and is part of the real estate industry. Shares are up 19.5% year to date as of the close of trading on Friday.

TheStreet Ratings rates Hospitality Properties as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • 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 9.0%. 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.
  • In its most recent trading session, HPT 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 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.
  • HOSPITALITY PROPERTIES TRUST's earnings per share declined by 40.0% in the most recent quarter compared to 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, HOSPITALITY PROPERTIES TRUST reported lower earnings of $0.84 versus $1.30 in the prior year. This year, the market expects earnings to be in line with last year ($0.84 versus $0.84).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 30.3% when compared to the same quarter one year ago, falling from $38.22 million to $26.63 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.

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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