Best Of The Buy-Rated Dividend Stocks: Top 3 Companies: ARI, RSO, APU

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

Apollo Commercial Real Estate Finance

Dividend Yield: 9.80%

Apollo Commercial Real Estate Finance (NYSE: ARI) shares currently have a dividend yield of 9.80%.

Apollo Commercial Real Estate Finance, Inc. operates as a commercial real estate finance company in the United States. The company has a P/E ratio of 14.94.

The average volume for Apollo Commercial Real Estate Finance has been 218,700 shares per day over the past 30 days. Apollo Commercial Real Estate Finance has a market cap of $600.5 million and is part of the real estate industry. Shares are up 0.3% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Apollo Commercial Real Estate Finance as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, increase in stock price during the past year 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 8.3%. Since the same quarter one year prior, revenues rose by 31.1%. 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.
  • The gross profit margin for APOLLO COMMERCIAL RE FIN INC is currently very high, coming in at 77.54%. Regardless of ARI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ARI's net profit margin of 65.56% significantly outperformed against the industry.
  • 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 the Real Estate Investment Trusts (REITs) industry average. The net income increased by 5.6% when compared to the same quarter one year prior, going from $12.21 million to $12.90 million.
  • In its most recent trading session, ARI 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. 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.
  • APOLLO COMMERCIAL RE FIN INC's earnings per share declined by 44.2% 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, APOLLO COMMERCIAL RE FIN INC increased its bottom line by earning $1.68 versus $1.34 in the prior year. For the next year, the market is expecting a contraction of 13.7% in earnings ($1.45 versus $1.68).

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

Resource Capital Corporation

Dividend Yield: 13.60%

Resource Capital Corporation (NYSE: RSO) shares currently have a dividend yield of 13.60%.

Resource Capital Corp., a specialty finance company, purchases and manages a diversified portfolio of commercial real estate-related assets and commercial finance assets in the United States. The company has a P/E ratio of 12.25.

The average volume for Resource Capital Corporation has been 948,800 shares per day over the past 30 days. Resource Capital Corporation has a market cap of $746.8 million and is part of the real estate industry. Shares are up 7% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Resource Capital Corporation 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 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:
  • 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 30.6% when compared to the same quarter one year prior, rising from $18.46 million to $24.12 million.
  • The gross profit margin for RESOURCE CAPITAL CORP is rather high; currently it is at 55.97%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, RSO's net profit margin of 68.27% significantly outperformed against the industry.
  • 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.
  • RSO, with its decline in revenue, underperformed when compared the industry average of 8.3%. Since the same quarter one year prior, revenues fell by 19.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

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

AmeriGas Partners

Dividend Yield: 7.80%

AmeriGas Partners (NYSE: APU) shares currently have a dividend yield of 7.80%.

AmeriGas Partners, L.P. operates as a retail and wholesale distributor of propane gas, and related equipment and supplies in the United States. The company has a P/E ratio of 25.62.

The average volume for AmeriGas Partners has been 149,000 shares per day over the past 30 days. AmeriGas Partners has a market cap of $4.0 billion and is part of the utilities industry. Shares are up 11.1% year to date as of the close of trading on Thursday.

TheStreet Ratings rates AmeriGas Partners as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, expanding profit margins, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

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 Gas Utilities industry. The net income increased by 61.3% when compared to the same quarter one year prior, rising from -$89.38 million to -$34.60 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.6%. Since the same quarter one year prior, revenues slightly increased by 1.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 47.25% is the gross profit margin for AMERIGAS PARTNERS -LP which we consider to be strong. 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 -5.94% trails the industry average.
  • 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 Gas Utilities industry and the overall market on the basis of return on equity, AMERIGAS PARTNERS -LP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • In its most recent trading session, APU 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.

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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