5 Buy-Rated Dividend Stocks: HR, TAL, SO, EPB, PPL

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: 4.20%

Healthcare Realty (NYSE: HR) shares currently have a dividend yield of 4.20%.

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 285.50.

The average volume for Healthcare Realty has been 632,700 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 18.9% 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 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 12.0%. Since the same quarter one year prior, revenues slightly increased by 8.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • HEALTHCARE REALTY TRUST INC reported flat earnings per share in the most recent 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, 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 ($0.23 versus $0.10).
  • Compared to its closing price of one year ago, HR's share price has jumped by 39.84%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • 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.
  • The gross profit margin for HEALTHCARE REALTY TRUST INC is currently lower than what is desirable, coming in at 26.50%. Regardless of HR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, HR's net profit margin of -1.20% significantly underperformed when compared to the industry average.

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TAL International Group

Dividend Yield: 6.10%

TAL International Group (NYSE: TAL) shares currently have a dividend yield of 6.10%.

TAL International Group, Inc. engages in leasing intermodal containers and chassis worldwide. The company operates in two segments, Equipment Leasing and Equipment Trading. The company has a P/E ratio of 10.76.

The average volume for TAL International Group has been 430,500 shares per day over the past 30 days. TAL International Group has a market cap of $1.5 billion and is part of the diversified services industry. Shares are up 18.9% year to date as of the close of trading on Thursday.

TheStreet Ratings rates TAL International Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, growth in earnings per share, increase in net income and expanding profit margins. 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:
  • TAL's revenue growth has slightly outpaced the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 12.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • TAL INTERNATIONAL GROUP INC has improved earnings per share by 14.3% 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, TAL INTERNATIONAL GROUP INC increased its bottom line by earning $3.87 versus $3.36 in the prior year. This year, the market expects an improvement in earnings ($4.42 versus $3.87).
  • 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 13.9% when compared to the same quarter one year prior, going from $32.93 million to $37.52 million.
  • 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 Trading Companies & Distributors industry and the overall market, TAL INTERNATIONAL GROUP INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for TAL INTERNATIONAL GROUP INC is currently very high, coming in at 86.20%. Regardless of TAL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TAL's net profit margin of 24.03% significantly outperformed against the industry.

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.

Southern

Dividend Yield: 4.40%

Southern (NYSE: SO) shares currently have a dividend yield of 4.40%.

The Southern Company, together with its subsidiaries, operates as a public electric utility company. The company has a P/E ratio of 19.56.

The average volume for Southern has been 3,849,800 shares per day over the past 30 days. Southern has a market cap of $39.8 billion and is part of the utilities industry. Shares are up 6.3% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Southern as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations 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 13.0%. Since the same quarter one year prior, revenues slightly increased by 8.1%. 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.
  • Net operating cash flow has increased to $737.00 million or 29.75% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 11.10%.
  • SOUTHERN CO 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, SOUTHERN CO increased its bottom line by earning $2.67 versus $2.55 in the prior year. This year, the market expects an improvement in earnings ($2.75 versus $2.67).
  • In its most recent trading session, SO 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.
  • The gross profit margin for SOUTHERN CO is currently lower than what is desirable, coming in at 34.20%. Regardless of SO'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 2.48% trails 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.

El Paso Pipeline Partners

Dividend Yield: 5.70%

El Paso Pipeline Partners (NYSE: EPB) shares currently have a dividend yield of 5.70%.

El Paso Pipeline Partners, L.P. engages in the ownership and operation of interstate natural gas transportation and terminaling facilities in the United States. The company has a P/E ratio of 19.87.

The average volume for El Paso Pipeline Partners has been 427,600 shares per day over the past 30 days. El Paso Pipeline Partners has a market cap of $9.4 billion and is part of the energy industry. Shares are up 17.7% year to date as of the close of trading on Thursday.

TheStreet Ratings rates El Paso Pipeline Partners as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, notable return on equity, expanding profit margins 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:
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 30.07% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, EPB should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income increased by 16.8% when compared to the same quarter one year prior, going from $149.00 million to $174.00 million.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, EL PASO PIPELINE PARTNERS LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • The gross profit margin for EL PASO PIPELINE PARTNERS LP is currently very high, coming in at 76.20%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 45.07% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $276.00 million or 32.69% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -13.28%.

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.

PPL

Dividend Yield: 4.70%

PPL (NYSE: PPL) shares currently have a dividend yield of 4.70%.

PPL Corporation, an energy and utility holding company, engages in the generation, transmission, distribution, and sale of electricity to wholesale and retail customers in the United States and the United Kingdom. The company operates in four segments: Kentucky Regulated, U.K. The company has a P/E ratio of 13.42.

The average volume for PPL has been 4,462,900 shares per day over the past 30 days. PPL has a market cap of $18.5 billion and is part of the utilities industry. Shares are up 8.3% year to date as of the close of trading on Thursday.

TheStreet Ratings rates PPL as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins, increase in stock price during the past year, attractive valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:
  • 39.90% is the gross profit margin for PPL CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 16.80% is above that of the industry average.
  • 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.
  • The revenue fell significantly faster than the industry average of 13.0%. Since the same quarter one year prior, revenues fell by 40.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Electric Utilities industry and the overall market, PPL CORP's return on equity 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.

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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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