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."

Healthcare Realty

Dividend Yield: 4.10%

Healthcare Realty (NYSE: HR) shares currently have a dividend yield of 4.10%.

Healthcare Realty Trust Incorporated is an independent real estate investment trust. The firm invests in real estate markets of the United States. The company has a P/E ratio of 294.40.

The average volume for Healthcare Realty has been 539,300 shares per day over the past 30 days. Healthcare Realty has a market cap of $2.6 billion and is part of the real estate industry. Shares are up 21.7% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Healthcare Realty as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, good cash flow from operations 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:
  • 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 8.2%. 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.
  • Compared to its closing price of one year ago, HR's share price has jumped by 37.14%, exceeding the performance of the broader market during that same time frame. 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.
  • HEALTHCARE REALTY TRUST INC 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HEALTHCARE REALTY TRUST INC turned its bottom line around by earning $0.10 versus -$0.04 in the prior year. This year, the market expects an improvement in earnings ($0.22 versus $0.10).
  • Net operating cash flow has increased to $44.13 million or 16.77% when compared to the same quarter last year. Despite an increase in cash flow, HEALTHCARE REALTY TRUST INC's cash flow growth rate is still lower than the industry average growth rate of 38.58%.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, HEALTHCARE REALTY TRUST INC underperformed against that of the industry average and is significantly less than that of the S&P 500.

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DineEquity

Dividend Yield: 4.30%

DineEquity (NYSE: DIN) shares currently have a dividend yield of 4.30%.

DineEquity, Inc., through its subsidiaries, develops, franchises, and operates full-service restaurant chains in the United States and internationally. The company has a P/E ratio of 10.52.

The average volume for DineEquity has been 181,000 shares per day over the past 30 days. DineEquity has a market cap of $1.3 billion and is part of the leisure industry. Shares are up 5.5% year to date as of the close of trading on Thursday.

TheStreet Ratings rates DineEquity as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, reasonable valuation levels, expanding profit margins 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, DIN's share price has jumped by 44.51%, 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, DIN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The gross profit margin for DINEEQUITY INC is rather high; currently it is at 59.50%. 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 11.86% trails the industry average.
  • The revenue fell significantly faster than the industry average of 1.1%. Since the same quarter one year prior, revenues fell by 34.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, DINEEQUITY INC's return on equity significantly exceeds 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.

Realty Income Corporation

Dividend Yield: 4.40%

Realty Income Corporation (NYSE: O) shares currently have a dividend yield of 4.40%.

Realty Income Corporation engages in the acquisition and ownership of commercial retail real estate properties in the United States. The company leases its retail properties primarily to regional and national retail chain store operators. The company has a P/E ratio of 57.30.

The average volume for Realty Income Corporation has been 1,837,000 shares per day over the past 30 days. Realty Income Corporation has a market cap of $8.8 billion and is part of the real estate industry. Shares are up 23.1% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Realty Income Corporation as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, 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:
  • O's revenue growth has slightly outpaced the industry average of 16.4%. Since the same quarter one year prior, revenues rose by 16.4%. 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.
  • Compared to its closing price of one year ago, O's share price has jumped by 26.31%, 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, O should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has increased to $117.94 million or 18.28% when compared to the same quarter last year. Despite an increase in cash flow, REALTY INCOME CORP's cash flow growth rate is still lower than the industry average growth rate of 38.58%.
  • The gross profit margin for REALTY INCOME CORP is rather high; currently it is at 56.20%. Regardless of O's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, O's net profit margin of 29.98% compares favorably to the industry average.
  • REALTY INCOME CORP's earnings per share declined by 24.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, REALTY INCOME CORP reported lower earnings of $0.76 versus $0.96 in the prior year. This year, the market expects an improvement in earnings ($0.99 versus $0.76).

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.

Targa Resources Partners

Dividend Yield: 5.80%

Targa Resources Partners (NYSE: NGLS) shares currently have a dividend yield of 5.80%.

Targa Resources Partners LP provides midstream natural gas, natural gas liquid (NGL), terminaling, and crude oil gathering services in the United States. The company operates in two divisions, Gathering and Processing, and Logistics and Marketing. The company has a P/E ratio of 40.33.

The average volume for Targa Resources Partners has been 441,400 shares per day over the past 30 days. Targa Resources Partners has a market cap of $4.9 billion and is part of the energy industry. Shares are up 24.9% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Targa Resources Partners as a buy. The company's strongest point has been its 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:
  • TARGA RESOURCES PARTNERS 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. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, TARGA RESOURCES PARTNERS LP reported lower earnings of $1.20 versus $1.98 in the prior year. This year, the market expects an improvement in earnings ($1.21 versus $1.20).
  • NGLS, with its decline in revenue, underperformed when compared the industry average of 1.3%. Since the same quarter one year prior, revenues fell by 21.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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. 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.
  • The gross profit margin for TARGA RESOURCES PARTNERS LP is currently extremely low, coming in at 11.40%. Regardless of NGLS'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 2.18% trails the industry average.
  • Net operating cash flow has decreased to $149.90 million or 28.48% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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.

Reynolds American

Dividend Yield: 5.10%

Reynolds American (NYSE: RAI) shares currently have a dividend yield of 5.10%.

Reynolds American Inc., through its subsidiaries, manufactures and sells cigarette and other tobacco products in the United States. The company operates through RJR Tobacco, American Snuff, and Santa Fe segments. The company has a P/E ratio of 17.11.

The average volume for Reynolds American has been 2,439,000 shares per day over the past 30 days. Reynolds American has a market cap of $25.2 billion and is part of the tobacco industry. Shares are up 12.9% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Reynolds American 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, largely solid financial position with reasonable debt levels by most measures, expanding profit margins 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:
  • 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 Tobacco industry and the overall market, REYNOLDS AMERICAN INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $655.00 million or 13.12% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -20.20%.
  • The debt-to-equity ratio is somewhat low, currently at 0.97, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.72 is somewhat weak and could be cause for future problems.
  • 46.80% is the gross profit margin for REYNOLDS AMERICAN INC which we consider to be strong. Regardless of RAI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RAI's net profit margin of 6.68% is significantly lower than the industry average.
  • REYNOLDS AMERICAN INC 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. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, REYNOLDS AMERICAN INC reported lower earnings of $2.24 versus $2.41 in the prior year. This year, the market expects an improvement in earnings ($3.21 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.

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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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