3 Buy-Rated Dividend Stocks: HCP, LXP, ETE

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

HCP

Dividend Yield: 4.10%

HCP (NYSE: HCP) shares currently have a dividend yield of 4.10%.

HCP, Inc. is an independent hybrid real estate investment trust. The fund invests in real estate markets of the United States. The company has a P/E ratio of 26.47.

The average volume for HCP has been 2,343,600 shares per day over the past 30 days. HCP has a market cap of $23.1 billion and is part of the real estate industry. Shares are up 9.7% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates HCP as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. 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:
  • HCP's revenue growth has slightly outpaced the industry average of 12.1%. Since the same quarter one year prior, revenues rose by 13.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Compared to where it was 12 months ago, this stock has enjoyed a nice rise of 26.93% which was in line with the performance of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HCP should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • HCP INC has improved earnings per share by 21.4% 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, HCP INC increased its bottom line by earning $1.83 versus $1.27 in the prior year. This year, the market expects an improvement in earnings ($1.99 versus $1.83).
  • 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 Real Estate Investment Trusts (REITs) industry average. The net income increased by 19.2% when compared to the same quarter one year prior, going from $193.38 million to $230.59 million.
  • Net operating cash flow has increased to $214.35 million or 14.95% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -16.25%.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

Lexington Realty

Dividend Yield: 4.80%

Lexington Realty (NYSE: LXP) shares currently have a dividend yield of 4.80%.

Lexington Corporate Properties Trust operates as a self-managed and self-administered real estate investment trust (REIT). The company acquires, owns, and manages a portfolio of office, industrial, and retail properties net-leased to corporate tenants in the United States. The company has a P/E ratio of 15.04.

The average volume for Lexington Realty has been 2,214,600 shares per day over the past 30 days. Lexington Realty has a market cap of $2.7 billion and is part of the real estate industry. Shares are up 21.6% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Lexington Realty 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 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:
  • LXP's revenue growth has slightly outpaced the industry average of 12.1%. Since the same quarter one year prior, revenues rose by 13.5%. 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.
  • This stock has managed to rise its share value by 51.83% over the past twelve months. Regarding the stock's future course, although almost any stock can fall in a broad market decline, LXP 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 $57.13 million or 30.44% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -16.25%.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, LEXINGTON REALTY TRUST has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

Energy Transfer Equity

Dividend Yield: 4.30%

Energy Transfer Equity (NYSE: ETE) shares currently have a dividend yield of 4.30%.

Energy Transfer Equity, L.P., through its subsidiaries, provides diversified energy-related services in the United States. The company sells natural gas to electric utilities, independent power plants, local distribution companies, industrial end-users, and other marketing companies. The company has a P/E ratio of 84.10.

The average volume for Energy Transfer Equity has been 841,900 shares per day over the past 30 days. Energy Transfer Equity has a market cap of $16.8 billion and is part of the energy industry. Shares are up 31.9% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Energy Transfer Equity as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • ETE's very impressive revenue growth greatly exceeded the industry average of 9.7%. Since the same quarter one year prior, revenues leaped by 569.4%. 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.
  • Net operating cash flow has significantly increased by 315.84% to $330.00 million when compared to the same quarter last year. In addition, ENERGY TRANSFER EQUITY LP has also vastly surpassed the industry average cash flow growth rate of -23.08%.
  • Compared to its closing price of one year ago, ETE's share price has jumped by 59.71%, 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.
  • ENERGY TRANSFER EQUITY 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. 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, ENERGY TRANSFER EQUITY LP increased its bottom line by earning $1.61 versus $1.40 in the prior year. This year, the market expects an improvement in earnings ($2.32 versus $1.61).
  • 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 Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, ENERGY TRANSFER EQUITY LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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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