Buy These Top 3 Buy-Rated Dividend Stocks Today: STWD, PSEC, 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 3 stocks with substantial yields, that ultimately, we have rated "Buy."

Starwood Property

Dividend Yield: 6.40%

Starwood Property (NYSE: STWD) shares currently have a dividend yield of 6.40%.

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 16.24.

The average volume for Starwood Property has been 1,736,000 shares per day over the past 30 days. Starwood Property has a market cap of $5.6 billion and is part of the real estate industry. Shares are up 4.4% year-to-date as of the close of trading on Friday.

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.

Prospect Capital Corporation

Dividend Yield: 11.80%

Prospect Capital Corporation (NASDAQ: PSEC) shares currently have a dividend yield of 11.80%.

Prospect Capital Corporation is a business development company. The company has a P/E ratio of 10.28.

The average volume for Prospect Capital Corporation has been 2,865,400 shares per day over the past 30 days. Prospect Capital Corporation has a market cap of $3.2 billion and is part of the financial services industry. Shares are down 0.1% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Prospect Capital Corporation as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels, compelling growth in net income, expanding profit margins and good cash flow from operations. 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 1.3%. Since the same quarter one year prior, revenues rose by 30.2%. 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 Capital Markets industry. The net income increased by 69.1% when compared to the same quarter one year prior, rising from $47.25 million to $79.90 million.
  • The gross profit margin for PROSPECT CAPITAL CORP is rather high; currently it is at 68.15%. Regardless of PSEC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PSEC's net profit margin of 49.61% significantly outperformed against the industry.
  • Net operating cash flow has significantly increased by 50.05% to -$245.45 million when compared to the same quarter last year. Despite an increase in cash flow of 50.05%, PROSPECT CAPITAL CORP is still growing at a significantly lower rate than the industry average of 460.58%.

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: 4.40%

People's United Financial (NASDAQ: PBCT) shares currently have a dividend yield of 4.40%.

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 19.29.

The average volume for People's United Financial has been 3,511,000 shares per day over the past 30 days. People's United Financial has a market cap of $4.7 billion and is part of the banking industry. Shares are down 1.8% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates People's United Financial as a buy. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, growth in earnings per share, reasonable valuation levels, 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:
  • 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.
  • 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 $0.74 versus $0.72 in the prior year. This year, the market expects an improvement in earnings ($0.87 versus $0.74).
  • The gross profit margin for PEOPLE'S UNITED FINL INC is currently very high, coming in at 88.46%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, PBCT's net profit margin of 17.77% significantly trails the industry average.
  • The revenue fell significantly faster than the industry average of 106.4%. Since the same quarter one year prior, revenues slightly dropped by 0.8%. The declining revenue has not hurt the company's bottom line, with increasing 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.

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