Buy-Rated Dividend Stocks: Top 4 Companies: MPW, RDS.B, NGLS, RAI

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."

Medical Properties

Dividend Yield: 6.70%

Medical Properties (NYSE: MPW) shares currently have a dividend yield of 6.70%.

Medical Properties Trust, Inc. operates as a real estate investment trust (REIT) in the United States. It acquires, develops, and invests in healthcare facilities; and leases healthcare facilities to healthcare operating companies and healthcare providers. The company has a P/E ratio of 18.20.

The average volume for Medical Properties has been 1,041,100 shares per day over the past 30 days. Medical Properties has a market cap of $2.0 billion and is part of the real estate industry. Shares are up 2.8% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Medical Properties as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, 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:
  • MPW's revenue growth has slightly outpaced the industry average of 9.6%. Since the same quarter one year prior, revenues rose by 13.7%. 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 $45.32 million or 49.63% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 8.60%.
  • The gross profit margin for MEDICAL PROPERTIES TRUST is rather high; currently it is at 67.69%. Regardless of MPW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MPW's net profit margin of 41.84% significantly outperformed against the industry.
  • MEDICAL PROPERTIES TRUST's earnings per share declined by 5.9% 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, MEDICAL PROPERTIES TRUST increased its bottom line by earning $0.56 versus $0.13 in the prior year. This year, the market expects an improvement in earnings ($0.75 versus $0.56).
  • 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, MEDICAL PROPERTIES TRUST'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.

Royal Dutch Shell

Dividend Yield: 4.90%

Royal Dutch Shell (NYSE: RDS.B) shares currently have a dividend yield of 4.90%.

Royal Dutch Shell plc operates as an independent oil and gas company worldwide. The company explores for and extracts crude oil, natural gas, and natural gas liquids. The company has a P/E ratio of 9.38.

The average volume for Royal Dutch Shell has been 1,037,000 shares per day over the past 30 days. Royal Dutch Shell has a market cap of $234.6 billion and is part of the energy industry. Shares are down 1.4% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Royal Dutch Shell as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures 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:
  • RDS.B's revenue growth has slightly outpaced the industry average of 5.7%. Since the same quarter one year prior, revenues slightly increased by 3.9%. 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 slightly increased to $10,409.00 million or 9.76% when compared to the same quarter last year. In addition, ROYAL DUTCH SHELL PLC has also modestly surpassed the industry average cash flow growth rate of 2.54%.
  • RDS.B's debt-to-equity ratio is very low at 0.21 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.82 is somewhat weak and could be cause for future problems.
  • 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.

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

Targa Resources Partners

Dividend Yield: 5.80%

Targa Resources Partners (NYSE: NGLS) shares currently have a dividend yield of 5.80%.

Targa Resources Partners LP provides midstream natural gas, natural gas liquid (NGL), terminaling, and crude oil gathering services in the United States. The company operates in two divisions, Gathering and Processing, and Logistics and Marketing. The company has a P/E ratio of 84.92.

The average volume for Targa Resources Partners has been 346,500 shares per day over the past 30 days. Targa Resources Partners has a market cap of $5.5 billion and is part of the energy industry. Shares are down 2.6% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Targa Resources Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, increase in net income and solid stock price performance. 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 came in higher than the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 11.8%. Growth in the company's revenue appears to have helped boost 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 146.7% when compared to the same quarter one year prior, rising from $24.20 million to $59.70 million.
  • Net operating cash flow has slightly increased to $99.50 million or 9.94% when compared to the same quarter last year. In addition, TARGA RESOURCES PARTNERS LP has also modestly surpassed the industry average cash flow growth rate of 2.54%.
  • The strong earnings growth this company has enjoyed -- up -- has apparently played a role in driving up its share price by a solid 28.45%. In addition, the rise in the general market has likely contributed to this stock's strong performance during this past year.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.
  • TARGA RESOURCES 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, TARGA RESOURCES PARTNERS LP reported lower earnings of $1.20 versus $1.98 in the prior year. For the next year, the market is expecting a contraction of 22.5% in earnings ($0.93 versus $1.20).

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 16.90.

The average volume for Reynolds American has been 1,959,200 shares per day over the past 30 days. Reynolds American has a market cap of $26.1 billion and is part of the tobacco industry. Shares are down 3.3% year-to-date as of the close of trading on Friday.

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.

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