4 Buy-Rated Dividend Stocks: HME, GSK, EPR, HPT

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

Home Properties

Dividend Yield: 4.30%

Home Properties (NYSE: HME) shares currently have a dividend yield of 4.30%.

Home Properties, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in the ownership, management, acquisition, rehabilitation and development of residential apartment communities. The company has a P/E ratio of 46.28.

The average volume for Home Properties has been 388,800 shares per day over the past 30 days. Home Properties has a market cap of $3.4 billion and is part of the real estate industry. Shares are up 6.4% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Home Properties as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, reasonable valuation levels, increase in stock price during the past year and notable return on equity. 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 237.1% when compared to the same quarter one year prior, rising from $15.39 million to $51.88 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.1%. 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.
  • 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, HOME PROPERTIES INC's return on equity is below that of both the industry average and the S&P 500.
  • In its most recent trading session, HME 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. 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.

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GlaxoSmithKline

Dividend Yield: 4.30%

GlaxoSmithKline (NYSE: GSK) shares currently have a dividend yield of 4.30%.

GlaxoSmithKline plc, together with its subsidiaries, discovers, develops, manufactures, and markets pharmaceutical products, over-the-counter medicines, and health-related consumer products worldwide. The company has a P/E ratio of 15.30.

The average volume for GlaxoSmithKline has been 2,779,500 shares per day over the past 30 days. GlaxoSmithKline has a market cap of $137.1 billion and is part of the drugs industry. Shares are up 16.9% year to date as of the close of trading on Thursday.

TheStreet Ratings rates GlaxoSmithKline as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, increase in stock price during the past year 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 6.7%. Since the same quarter one year prior, revenues slightly increased by 2.8%. 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.
  • 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 Pharmaceuticals industry and the overall market, GLAXOSMITHKLINE PLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 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 gross profit margin for GLAXOSMITHKLINE PLC is currently very high, coming in at 71.00%. Regardless of GSK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 13.00% trails the industry average.
  • GLAXOSMITHKLINE PLC's earnings per share declined by 22.4% 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 year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, GLAXOSMITHKLINE PLC reported lower earnings of $2.97 versus $3.21 in the prior year. This year, the market expects an improvement in earnings ($3.56 versus $2.97).

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: 5.30%

EPR Properties (NYSE: EPR) shares currently have a dividend yield of 5.30%.

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 23.83.

The average volume for EPR Properties has been 290,300 shares per day over the past 30 days. EPR Properties has a market cap of $2.8 billion and is part of the real estate industry. Shares are up 25.8% year to date as of the close of trading on Thursday.

TheStreet Ratings rates EPR Properties 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 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:
  • 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. Although other factors naturally played a role, the company's strong earnings growth was key. 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 has improved earnings per share by 48.0% 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, EPR PROPERTIES increased its bottom line by earning $2.31 versus $1.62 in the prior year. This year, the market expects an improvement in earnings ($2.80 versus $2.31).
  • 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 92.8% when compared to the same quarter one year prior, rising from $21.37 million to $41.21 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.1%. Since the same quarter one year prior, revenues slightly increased by 8.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for EPR PROPERTIES is rather high; currently it is at 67.00%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 49.22% significantly outperformed against 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.

Hospitality Properties

Dividend Yield: 6.20%

Hospitality Properties (NYSE: HPT) shares currently have a dividend yield of 6.20%.

Hospitality Properties Trust, a real estate investment trust (REIT), engages in buying, owning, and leasing hotels. The company has a P/E ratio of 40.14.

The average volume for Hospitality Properties has been 1,346,200 shares per day over the past 30 days. Hospitality Properties has a market cap of $3.8 billion and is part of the real estate industry. Shares are up 28.6% year to date as of the close of trading on Thursday.

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 10.1%. 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.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
  • Net operating cash flow has declined marginally to $99.25 million or 6.70% when compared to the same quarter last year. Despite a decrease in cash flow of 6.70%, HOSPITALITY PROPERTIES TRUST is still significantly exceeding the industry average of -63.29%.
  • 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).

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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