Best Of The Buy-Rated Dividend Stocks: Top 5 Companies: STWD, DUK, HFC, GOV, MWE

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."

Starwood Property

Dividend Yield: 6.90%

Starwood Property (NYSE: STWD) shares currently have a dividend yield of 6.90%.

Starwood Property Trust, Inc. engages in originating, investing in, financing, and managing commercial mortgage loans, other commercial real estate debt investments, commercial mortgage-backed securities, and other commercial real estate-related debt investments. The company has a P/E ratio of 14.89.

The average volume for Starwood Property has been 2,361,700 shares per day over the past 30 days. Starwood Property has a market cap of $5.2 billion and is part of the real estate industry. Shares are up 15.4% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates Starwood Property as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share, compelling growth in net income, 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:
  • STWD's very impressive revenue growth greatly exceeded the industry average of 9.4%. Since the same quarter one year prior, revenues leaped by 117.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • STARWOOD PROPERTY TRUST INC has improved earnings per share by 20.9% 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, STARWOOD PROPERTY TRUST INC increased its bottom line by earning $1.78 versus $1.41 in the prior year. This year, the market expects an improvement in earnings ($2.04 versus $1.78).
  • 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 78.7% when compared to the same quarter one year prior, rising from $50.21 million to $89.72 million.
  • 46.15% is the gross profit margin for STARWOOD PROPERTY TRUST INC 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, STWD's net profit margin of 56.03% significantly outperformed against the industry.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.

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

Duke Energy Corporation

Dividend Yield: 4.40%

Duke Energy Corporation (NYSE: DUK) shares currently have a dividend yield of 4.40%.

Duke Energy Corporation operates as an energy company in the United States and Latin America. The company operates in three segments: U.S. Franchised Electric and Gas, Commercial Power, and International Energy. The U.S. The company has a P/E ratio of 21.23.

The average volume for Duke Energy Corporation has been 2,976,600 shares per day over the past 30 days. Duke Energy Corporation has a market cap of $50.2 billion and is part of the utilities industry. Shares are up 11.5% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates Duke Energy Corporation as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, expanding profit margins, good cash flow from operations, increase in stock price during the past year and growth in earnings per share. 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:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electric Utilities industry. The net income increased by 69.0% when compared to the same quarter one year prior, rising from $594.00 million to $1,004.00 million.
  • 38.00% is the gross profit margin for DUKE ENERGY 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 15.02% is above that of the industry average.
  • Net operating cash flow has slightly increased to $2,147.00 million or 8.59% when compared to the same quarter last year. In addition, DUKE ENERGY CORP has also modestly surpassed the industry average cash flow growth rate of 2.69%.
  • 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.
  • DUKE ENERGY CORP reported significant earnings per share improvement 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, DUKE ENERGY CORP reported lower earnings of $3.06 versus $3.84 in the prior year. This year, the market expects an improvement in earnings ($4.31 versus $3.06).

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

HollyFrontier

Dividend Yield: 4.40%

HollyFrontier (NYSE: HFC) shares currently have a dividend yield of 4.40%.

HollyFrontier Corporation operates as an independent petroleum refiner and marketer in the United States. It produces light products, such as gasoline, diesel fuel, jet fuel, specialty lubricant products, liquefied petroleum gas, fuel oil, and specialty and modified asphalt. The company has a P/E ratio of 8.72.

The average volume for HollyFrontier has been 3,064,600 shares per day over the past 30 days. HollyFrontier has a market cap of $9.1 billion and is part of the energy industry. Shares are down 1.3% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates HollyFrontier as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, 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:
  • HFC's revenue growth has slightly outpaced the industry average of 5.5%. Since the same quarter one year prior, revenues slightly increased by 2.4%. 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.
  • HFC's debt-to-equity ratio is very low at 0.15 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • 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.
  • HOLLYFRONTIER CORP has experienced 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, HOLLYFRONTIER CORP increased its bottom line by earning $8.41 versus $6.12 in the prior year. For the next year, the market is expecting a contraction of 52.4% in earnings ($4.00 versus $8.41).

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

Government Properties Income

Dividend Yield: 7.00%

Government Properties Income (NYSE: GOV) shares currently have a dividend yield of 7.00%.

Government Properties Income Trust operates as a real estate investment trust (REIT) in the United States. It primarily owns and leases office buildings that are leased mainly to government tenants. The company has a P/E ratio of 23.34.

The average volume for Government Properties Income has been 460,200 shares per day over the past 30 days. Government Properties Income has a market cap of $1.4 billion and is part of the real estate industry. Shares are up 2.7% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates Government Properties Income as a buy. The company's strengths can be seen in multiple areas, such as its 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 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 9.4%. Since the same quarter one year prior, revenues slightly increased by 7.5%. 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.
  • 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.
  • GOVERNMENT PPTYS INCOME TR's earnings per share declined by 12.0% 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, GOVERNMENT PPTYS INCOME TR reported lower earnings of $1.01 versus $1.06 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $1.01).
  • 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, GOVERNMENT PPTYS INCOME TR's return on equity is below that of both the industry average and 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.

MarkWest Energy Partners

Dividend Yield: 5.00%

MarkWest Energy Partners (NYSE: MWE) shares currently have a dividend yield of 5.00%.

Markwest Energy Partners, L.P., together with its subsidiaries, engages in the gathering, processing, and transportation of natural gas the United States. The company has a P/E ratio of 138.22.

The average volume for MarkWest Energy Partners has been 927,100 shares per day over the past 30 days. MarkWest Energy Partners has a market cap of $10.2 billion and is part of the energy industry. Shares are up 34.8% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates MarkWest Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its 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:
  • The revenue growth greatly exceeded the industry average of 5.5%. Since the same quarter one year prior, revenues rose by 49.9%. 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 $153.06 million or 14.84% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 0.84%.
  • Compared to its closing price of one year ago, MWE's share price has jumped by 44.19%, 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.
  • MARKWEST ENERGY PARTNERS LP's earnings per share declined by 30.8% 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, MARKWEST ENERGY PARTNERS LP increased its bottom line by earning $1.70 versus $0.80 in the prior year. For the next year, the market is expecting a contraction of 33.2% in earnings ($1.14 versus $1.70).
  • MWE's debt-to-equity ratio of 0.85 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that MWE's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.61 is low and demonstrates weak liquidity.

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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