What To Buy: Top 5 Buy-Rated Dividend Stocks: STWD, TE, VVC, ORI, PBCT

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: 6.60%

Starwood Property (NYSE: STWD) shares currently have a dividend yield of 6.60%.

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 15.64.

The average volume for Starwood Property has been 1,775,900 shares per day over the past 30 days. Starwood Property has a market cap of $5.4 billion and is part of the real estate industry. Shares are up 20.9% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Starwood Property as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in stock price during the past year, growth in earnings per share, compelling growth in net income and expanding profit margins. 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 9.6%. 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.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
  • 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 ($2.02 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.

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

TECO Energy

Dividend Yield: 5.10%

TECO Energy (NYSE: TE) shares currently have a dividend yield of 5.10%.

TECO Energy, Inc., an electric and gas utility holding company, engages in the regulated electric and gas utility operations. The company has a P/E ratio of 18.46.

The average volume for TECO Energy has been 2,218,500 shares per day over the past 30 days. TECO Energy has a market cap of $3.7 billion and is part of the utilities industry. Shares are up 1.9% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates TECO Energy as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, reasonable valuation levels 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:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Multi-Utilities industry. The net income increased by 42.7% when compared to the same quarter one year prior, rising from $44.00 million to $62.80 million.
  • TE, with its decline in revenue, underperformed when compared the industry average of 0.1%. Since the same quarter one year prior, revenues fell by 10.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • In its most recent trading session, TE 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.
  • Even though the current debt-to-equity ratio is 1.26, it is still below the industry average, suggesting that this level of debt is acceptable within the Multi-Utilities industry. Despite the fact that TE's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.62 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.

Vectren

Dividend Yield: 4.10%

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

Vectren Corporation, through its subsidiaries, provides energy delivery services to residential, commercial, and industrial and other contract customers in Indiana and west central Ohio. The company has a P/E ratio of 22.54.

The average volume for Vectren has been 330,700 shares per day over the past 30 days. Vectren has a market cap of $2.9 billion and is part of the utilities industry. Shares are up 19.9% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Vectren 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, growth in earnings per share and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 0.1%. Since the same quarter one year prior, revenues rose by 12.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • VECTREN CORP has improved earnings per share by 8.3% 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, VECTREN CORP increased its bottom line by earning $1.93 versus $1.72 in the prior year. This year, the market expects an improvement in earnings ($2.06 versus $1.93).
  • Net operating cash flow has significantly increased by 128.66% to $134.00 million when compared to the same quarter last year. In addition, VECTREN CORP has also vastly surpassed the industry average cash flow growth rate of 26.22%.
  • 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.

Old Republic International

Dividend Yield: 4.20%

Old Republic International (NYSE: ORI) shares currently have a dividend yield of 4.20%.

Old Republic International Corporation, through its subsidiaries, engages in underwriting insurance products primarily in the United States and Canada. The company has a P/E ratio of 14.62.

The average volume for Old Republic International has been 1,513,500 shares per day over the past 30 days. Old Republic International has a market cap of $4.4 billion and is part of the insurance industry. Shares are up 58.4% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Old Republic International 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, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 9.0%. Since the same quarter one year prior, revenues slightly increased by 5.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • ORI'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.
  • Powered by its strong earnings growth of 700.00% and other important driving factors, this stock has surged by 51.63% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • OLD REPUBLIC INTL CORP 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 year. We feel that this trend should continue. During the past fiscal year, OLD REPUBLIC INTL CORP continued to lose money by earning -$0.27 versus -$0.55 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus -$0.27).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 790.6% when compared to the same quarter one year prior, rising from -$14.90 million to $102.90 million.

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

People's United Financial

Dividend Yield: 4.30%

People's United Financial (NASDAQ: PBCT) shares currently have a dividend yield of 4.30%.

People's United Financial, Inc. operates as the bank holding company for People's United Bank that provides commercial banking, retail and business banking, and wealth management services to individual, corporate, and municipal customers. The company has a P/E ratio of 20.52.

The average volume for People's United Financial has been 2,841,700 shares per day over the past 30 days. People's United Financial has a market cap of $4.8 billion and is part of the banking industry. Shares are up 23.7% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates People's United Financial as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in stock price during the past year, expanding profit margins 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:
  • PEOPLE'S UNITED FINL INC has improved earnings per share by 5.5% 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, PEOPLE'S UNITED FINL INC increased its bottom line by earning $0.72 versus $0.57 in the prior year. This year, the market expects an improvement in earnings ($0.75 versus $0.72).
  • 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.
  • The gross profit margin for PEOPLE'S UNITED FINL INC is currently very high, coming in at 87.86%. Regardless of PBCT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PBCT's net profit margin of 17.40% is significantly lower than the industry average.
  • The revenue fell significantly faster than the industry average of 101.3%. Since the same quarter one year prior, revenues slightly dropped by 1.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 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 Thrifts & Mortgage Finance industry and the overall market, PEOPLE'S UNITED FINL INC'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.

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