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."

Annaly Capital Management

Dividend Yield: 11.40%

Annaly Capital Management (NYSE: NLY) shares currently have a dividend yield of 11.40%.

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 9.26.

The average volume for Annaly Capital Management has been 8,769,800 shares per day over the past 30 days. Annaly Capital Management has a market cap of $15.0 billion and is part of the real estate industry. Shares are up 10.4% year to date as of the close of trading on Thursday.

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. 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 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 36.21%.
  • 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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Sun Life Financial

Dividend Yield: 5.00%

Sun Life Financial (NYSE: SLF) shares currently have a dividend yield of 5.00%.

Sun Life Financial Inc., an international financial services organization, provides a range of protection and wealth accumulation products and services to individuals and corporate customers. The company has a P/E ratio of 12.16.

The average volume for Sun Life Financial has been 399,200 shares per day over the past 30 days. Sun Life Financial has a market cap of $16.9 billion and is part of the insurance industry. Shares are up 8.4% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Sun Life Financial as a buy. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, compelling growth in net income, attractive valuation levels, impressive record of earnings per share growth 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:
  • 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.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 185.3% when compared to the same quarter one year prior, rising from -$498.00 million to $425.00 million.
  • SUN LIFE FINANCIAL 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 year. During the past fiscal year, SUN LIFE FINANCIAL INC turned its bottom line around by earning $2.29 versus -$0.56 in the prior year.
  • 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 Insurance industry and the overall market on the basis of return on equity, SUN LIFE FINANCIAL INC has outperformed in comparison with the industry average, but has underperformed when compared to that of 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.

Pepco Holdings

Dividend Yield: 4.80%

Pepco Holdings (NYSE: POM) shares currently have a dividend yield of 4.80%.

Pepco Holdings, Inc., through its subsidiaries, engages in the transmission, distribution, and supply of electricity. The company also distributes and supplies natural gas. The company has a P/E ratio of 18.11.

The average volume for Pepco Holdings has been 2,017,800 shares per day over the past 30 days. Pepco Holdings has a market cap of $5.6 billion and is part of the utilities industry. Shares are up 15% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Pepco Holdings as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, good cash flow from operations, growth in earnings per share and notable return on equity. 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:
  • 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. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electric Utilities industry. The net income increased by 126.3% when compared to the same quarter one year prior, rising from $19.00 million to $43.00 million.
  • Net operating cash flow has increased to $173.00 million or 11.61% when compared to the same quarter last year. In addition, PEPCO HOLDINGS INC has also modestly surpassed the industry average cash flow growth rate of 5.75%.
  • PEPCO HOLDINGS 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, PEPCO HOLDINGS INC increased its bottom line by earning $1.24 versus $1.14 in the prior year. For the next year, the market is expecting a contraction of 8.5% in earnings ($1.14 versus $1.24).
  • POM, with its decline in revenue, underperformed when compared the industry average of 14.3%. Since the same quarter one year prior, revenues slightly dropped by 9.5%. 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.

Omega Healthcare Investors

Dividend Yield: 5.70%

Omega Healthcare Investors (NYSE: OHI) shares currently have a dividend yield of 5.70%.

Omega Healthcare Investors, Inc. operates as a real estate investment trust (REIT) in the United States. The company invests in healthcare facilities, principally long-term healthcare facilities in the United States. The company has a P/E ratio of 28.88.

The average volume for Omega Healthcare Investors has been 1,330,700 shares per day over the past 30 days. Omega Healthcare Investors has a market cap of $3.8 billion and is part of the real estate industry. Shares are up 41.1% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Omega Healthcare Investors as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. 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:
  • OHI's revenue growth has slightly outpaced the industry average of 16.4%. Since the same quarter one year prior, revenues rose by 24.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 57.89% and other important driving factors, this stock has surged by 50.54% 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, OHI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • OMEGA HEALTHCARE INVS 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, OMEGA HEALTHCARE INVS INC increased its bottom line by earning $1.11 versus $0.46 in the prior year. This year, the market expects an improvement in earnings ($1.33 versus $1.11).
  • 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 75.8% when compared to the same quarter one year prior, rising from $19.29 million to $33.92 million.
  • The gross profit margin for OMEGA HEALTHCARE INVS INC is rather high; currently it is at 61.90%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 35.70% is above that of 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.

KKR

Dividend Yield: 5.20%

KKR (NYSE: KKR) shares currently have a dividend yield of 5.20%.

Kohlberg Kravis Roberts & Co. is a private equity investment firm specializing in acquisitions, leveraged buyouts, management buyouts, special situations, growth equity, mature, and middle market investments. The company has a P/E ratio of 9.88.

The average volume for KKR has been 2,429,300 shares per day over the past 30 days. KKR has a market cap of $5.4 billion and is part of the financial services industry. Shares are up 34.6% year to date as of the close of trading on Thursday.

TheStreet Ratings rates KKR as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance and increase in net income. 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:
  • Compared to its closing price of one year ago, KKR's share price has jumped by 52.05%, exceeding the performance of the broader market during that same time frame. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Capital Markets industry average. The net income increased by 1.6% when compared to the same quarter one year prior, going from $190.44 million to $193.44 million.
  • KKR & CO LP's earnings per share declined by 13.8% 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, KKR & CO LP increased its bottom line by earning $2.23 versus $0.04 in the prior year. This year, the market expects an improvement in earnings ($2.49 versus $2.23).
  • KKR, with its decline in revenue, underperformed when compared the industry average of 4.7%. Since the same quarter one year prior, revenues fell by 17.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing 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.

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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