What To Buy: Top 4 Buy-Rated Dividend Stocks: LRY, WMB, RWT, 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 4 stocks with substantial yields, that ultimately, we have rated "Buy."

Liberty Property

Dividend Yield: 5.60%

Liberty Property (NYSE: LRY) shares currently have a dividend yield of 5.60%.

Liberty Property Trust is a publicly owned real estate investment holding trust. Through its subsidiary, it provides leasing, property management, development, acquisition, and other tenant-related services for a portfolio of industrial and office properties. The company has a P/E ratio of 32.66.

The average volume for Liberty Property has been 872,600 shares per day over the past 30 days. Liberty Property has a market cap of $4.9 billion and is part of the real estate industry. Shares are down 6% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Liberty Property as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, expanding profit margins, increase in net income 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:
  • LRY's revenue growth has slightly outpaced the industry average of 9.4%. Since the same quarter one year prior, revenues rose by 11.8%. 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.
  • 35.40% is the gross profit margin for LIBERTY PROPERTY TRUST 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 15.37% trails the industry average.
  • LIBERTY PROPERTY TRUST's earnings per share declined by 12.5% 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, LIBERTY PROPERTY TRUST increased its bottom line by earning $1.02 versus $0.99 in the prior year. This year, the market expects an improvement in earnings ($1.41 versus $1.02).
  • 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 3.2% when compared to the same quarter one year prior, going from $27.81 million to $28.70 million.

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

Williams Companies

Dividend Yield: 4.20%

Williams Companies (NYSE: WMB) shares currently have a dividend yield of 4.20%.

The Williams Companies, Inc. operates as an energy infrastructure company. The company has a P/E ratio of 39.52.

The average volume for Williams Companies has been 5,614,900 shares per day over the past 30 days. Williams Companies has a market cap of $23.8 billion and is part of the energy industry. Shares are up 6.6% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Williams Companies as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, 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 weak growth in earnings per share.

Highlights from the ratings report include:
  • Net operating cash flow has increased to $539.00 million or 25.05% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 0.84%.
  • 39.93% is the gross profit margin for WILLIAMS COS INC which we consider to be strong. Regardless of WMB's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WMB's net profit margin of 8.68% compares favorably to the industry average.
  • WMB, with its decline in revenue, slightly underperformed the industry average of 5.5%. Since the same quarter one year prior, revenues slightly dropped by 7.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing 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, 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.
  • The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 9.0% when compared to the same quarter one year ago, dropping from $155.00 million to $141.00 million.

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

Redwood

Dividend Yield: 5.70%

Redwood (NYSE: RWT) shares currently have a dividend yield of 5.70%.

Redwood Trust, Inc. engages in investing, financing, and managing real estate-related assets. The company has a P/E ratio of 9.09.

The average volume for Redwood has been 988,100 shares per day over the past 30 days. Redwood has a market cap of $1.6 billion and is part of the real estate industry. Shares are up 14.7% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Redwood as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, 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:
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market, REDWOOD TRUST INC's return on equity exceeds that of both the industry average and the S&P 500.
  • RWT's share price is up by an impressive 26.07% over the past year, but this positive result lagged behind an even stronger performance in the stock market as a whole, as reflected in the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, RWT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • REDWOOD TRUST INC's earnings per share declined by 47.9% 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, REDWOOD TRUST INC increased its bottom line by earning $1.59 versus $0.31 in the prior year. This year, the market expects an improvement in earnings ($1.97 versus $1.59).
  • RWT, with its decline in revenue, underperformed when compared the industry average of 9.4%. Since the same quarter one year prior, revenues slightly dropped by 2.9%. Weakness in the company's revenue seems to have hurt the 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.

Kinder Morgan Energy Partners

Dividend Yield: 6.70%

Kinder Morgan Energy Partners (NYSE: KMP) shares currently have a dividend yield of 6.70%.

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 22.69.

The average volume for Kinder Morgan Energy Partners has been 1,204,600 shares per day over the past 30 days. Kinder Morgan Energy Partners has a market cap of $25.1 billion and is part of the energy industry. Shares are up 2.6% year to date as of the close of trading on Thursday.

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, good cash flow from operations 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:
  • The revenue growth greatly exceeded the industry average of 5.5%. Since the same quarter one year prior, revenues rose by 35.4%. 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 ($2.42 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 70.1% when compared to the same quarter one year prior, rising from $405.00 million to $689.00 million.
  • Net operating cash flow has increased to $956.00 million or 18.02% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 0.84%.
  • 39.07% is the gross profit margin for KINDER MORGAN ENERGY -LP which we consider to be strong. Regardless of KMP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, KMP's net profit margin of 20.37% significantly outperformed against the industry.

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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