Buy These Top 3 Buy-Rated Dividend Stocks Today: RGP, RAI, ARCC

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."

Regency Energy Partners

Dividend Yield: 7.30%

Regency Energy Partners (NYSE: RGP) shares currently have a dividend yield of 7.30%.

Regency Energy Partners LP engages in gathering, treating, processing, compressing, and transporting natural gas and natural gas liquids (NGLs). The company operates in Gathering and Processing, Natural Gas Transportation, NGL Services, and Contract Services segments. The company has a P/E ratio of 214.58.

The average volume for Regency Energy Partners has been 611,000 shares per day over the past 30 days. Regency Energy Partners has a market cap of $5.4 billion and is part of the energy industry. Shares are down 2.5% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Regency Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations, increase in net income, 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 somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 5.6%. Since the same quarter one year prior, revenues rose by 26.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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 Oil, Gas & Consumable Fuels industry. The net income increased by 2050.0% when compared to the same quarter one year prior, rising from -$2.00 million to $39.00 million.
  • Net operating cash flow has significantly increased by 136.25% to $186.00 million when compared to the same quarter last year. In addition, REGENCY ENERGY PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of 0.96%.
  • 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.
  • REGENCY ENERGY PARTNERS LP 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, REGENCY ENERGY PARTNERS LP reported lower earnings of $0.13 versus $0.29 in the prior year. This year, the market expects an improvement in earnings ($0.30 versus $0.13).

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: 5.20%

Reynolds American (NYSE: RAI) shares currently have a dividend yield of 5.20%.

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 16.96.

The average volume for Reynolds American has been 1,892,200 shares per day over the past 30 days. Reynolds American has a market cap of $26.2 billion and is part of the tobacco industry. Shares are down 3% year-to-date as of the close of trading on Thursday.

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 shows weak operating cash flow.

Highlights from the ratings report include:
  • RAI's revenue growth has slightly outpaced the industry average of 1.4%. Since the same quarter one year prior, revenues slightly increased by 0.8%. 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 54.05%. 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 21.40% trails the industry average.
  • REYNOLDS AMERICAN INC has improved earnings per share by 13.5% 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, 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 ($3.23 versus $2.24).
  • The net income growth from the same quarter one year ago has exceeded that of the Tobacco industry average, but is less than that of the S&P 500. The net income increased by 8.8% when compared to the same quarter one year prior, going from $420.00 million to $457.00 million.

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

Ares Capital Corporation

Dividend Yield: 8.60%

Ares Capital Corporation (NASDAQ: ARCC) shares currently have a dividend yield of 8.60%.

Ares Capital Corporation specializes in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle market companies. It also makes growth capital and general refinancing. The company has a P/E ratio of 8.50.

The average volume for Ares Capital Corporation has been 1,794,500 shares per day over the past 30 days. Ares Capital Corporation has a market cap of $5.0 billion and is part of the financial services industry. Shares are down 0.5% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Ares Capital Corporation as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels, expanding profit margins, notable return on equity and increase 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 greatly exceeded the industry average of 8.8%. Since the same quarter one year prior, revenues rose by 29.5%. 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 gross profit margin for ARES CAPITAL CORP is currently very high, coming in at 70.76%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 57.04% significantly outperformed against the industry average.
  • 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. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, ARES CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • 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 Capital Markets industry average. The net income increased by 3.1% when compared to the same quarter one year prior, going from $136.56 million to $140.80 million.

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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