5 Buy-Rated Dividend Stocks: SPH, DLR, LHO, RAI, KMP

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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."

Suburban Propane Partners

Dividend Yield: 7.20%

Suburban Propane Partners (NYSE: SPH) shares currently have a dividend yield of 7.20%.

Suburban Propane Partners, L.P., through its subsidiaries, engages in the retail marketing and distribution of propane, fuel oil, and refined fuels. The company has a P/E ratio of 35.90.

The average volume for Suburban Propane Partners has been 256,000 shares per day over the past 30 days. Suburban Propane Partners has a market cap of $2.9 billion and is part of the utilities industry. Shares are up 25.5% year to date as of the close of trading on Friday.

TheStreet Ratings rates Suburban Propane Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • SPH's very impressive revenue growth greatly exceeded the industry average of 9.4%. Since the same quarter one year prior, revenues leaped by 89.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Gas Utilities industry. The net income increased by 164.6% when compared to the same quarter one year prior, rising from $49.57 million to $131.15 million.
  • Net operating cash flow has significantly increased by 70.93% to $72.43 million when compared to the same quarter last year. In addition, SUBURBAN PROPANE PRTNRS -LP has also vastly surpassed the industry average cash flow growth rate of 4.80%.
  • Even though the current debt-to-equity ratio is 1.19, it is still below the industry average, suggesting that this level of debt is acceptable within the Gas Utilities industry. Despite the fact that SPH's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.60 is high and demonstrates strong liquidity.
  • 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. 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.

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

Digital Realty

Dividend Yield: 5.00%

Digital Realty (NYSE: DLR) shares currently have a dividend yield of 5.00%.

Digital Realty Trust, Inc., a real estate investment trust (REIT), through its controlling interest in Digital Realty Trust, L.P., engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate. The company has a P/E ratio of 43.25.

The average volume for Digital Realty has been 1,727,100 shares per day over the past 30 days. Digital Realty has a market cap of $8.1 billion and is part of the real estate industry. Shares are down 7.2% year to date as of the close of trading on Friday.

TheStreet Ratings rates Digital Realty as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels, good cash flow from operations and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 12.3%. Since the same quarter one year prior, revenues rose by 26.5%. 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.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Real Estate Investment Trusts (REITs) industry average, but is less than that of the S&P 500. The net income increased by 5.5% when compared to the same quarter one year prior, going from $48.04 million to $50.71 million.
  • Net operating cash flow has increased to $89.04 million or 26.23% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -19.11%.
  • DIGITAL REALTY TRUST INC's earnings per share declined by 5.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, DIGITAL REALTY TRUST INC increased its bottom line by earning $1.47 versus $1.31 in the prior year. For the next year, the market is expecting a contraction of 3.4% in earnings ($1.42 versus $1.47).

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

LaSalle Hotel Properties

Dividend Yield: 4.10%

LaSalle Hotel Properties (NYSE: LHO) shares currently have a dividend yield of 4.10%.

LaSalle Hotel Properties, a real estate investment trust (REIT), engages in the purchase, ownership, redevelopment, and leasing of primarily upscale and luxury full-service hotels in convention, resort, and urban business markets in the United States. The company has a P/E ratio of 37.73.

The average volume for LaSalle Hotel Properties has been 826,300 shares per day over the past 30 days. LaSalle Hotel Properties has a market cap of $2.6 billion and is part of the real estate industry. Shares are up 7.1% year to date as of the close of trading on Friday.

TheStreet Ratings rates LaSalle Hotel Properties as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • LASALLE HOTEL PROPERTIES has improved earnings per share by 27.6% 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, LASALLE HOTEL PROPERTIES increased its bottom line by earning $0.52 versus $0.11 in the prior year. This year, the market expects an improvement in earnings ($0.80 versus $0.52).
  • 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 16.1% when compared to the same quarter one year prior, going from $35.21 million to $40.86 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.3%. Since the same quarter one year prior, revenues slightly increased by 9.8%. 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, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.

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

Reynolds American

Dividend Yield: 4.90%

Reynolds American (NYSE: RAI) shares currently have a dividend yield of 4.90%.

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 18.24.

The average volume for Reynolds American has been 1,864,000 shares per day over the past 30 days. Reynolds American has a market cap of $27.7 billion and is part of the tobacco industry. Shares are up 22.9% year to date as of the close of trading on Friday.

TheStreet Ratings rates Reynolds American as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins, growth in earnings per share and increase in net income. 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:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.1%. Since the same quarter one year prior, revenues slightly increased by 0.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 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 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.
  • The gross profit margin for REYNOLDS AMERICAN INC is rather high; currently it is at 55.30%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 21.15% trails the industry average.
  • REYNOLDS AMERICAN INC has improved earnings per share by 7.7% 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, 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 ($3.24 versus $2.24).
  • The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Tobacco industry average. The net income increased by 4.1% when compared to the same quarter one year prior, going from $443.00 million to $461.00 million.

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

Kinder Morgan Energy Partners

Dividend Yield: 6.20%

Kinder Morgan Energy Partners (NYSE: KMP) shares currently have a dividend yield of 6.20%.

Kinder Morgan Energy Partners, L.P. operates as a pipeline transportation and energy storage company in North America. The company has a P/E ratio of 39.92.

The average volume for Kinder Morgan Energy Partners has been 1,423,200 shares per day over the past 30 days. Kinder Morgan Energy Partners has a market cap of $26.2 billion and is part of the energy industry. Shares are up 6.8% year to date as of the close of trading on Friday.

TheStreet Ratings rates Kinder Morgan Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth 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:
  • KMP's very impressive revenue growth greatly exceeded the industry average of 10.8%. Since the same quarter one year prior, revenues leaped by 50.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • KINDER MORGAN ENERGY -LP 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, KINDER MORGAN ENERGY -LP turned its bottom line around by earning $1.64 versus -$0.33 in the prior year. This year, the market expects an improvement in earnings ($2.50 versus $1.64).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 657.6% when compared to the same quarter one year prior, rising from $132.00 million to $1,000.00 million.
  • 36.36% is the gross profit margin for KINDER MORGAN ENERGY -LP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, KMP's net profit margin of 33.14% significantly outperformed against the industry.
  • In its most recent trading session, KMP 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, the stock's 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 the other strengths this company displays justify these higher price levels.

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

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