What To Buy: Top 5 Buy-Rated Dividend Stocks: DRI, LO, VZ, PEG, PPL

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."

Darden Restaurants

Dividend Yield: 4.60%

Darden Restaurants (NYSE: DRI) shares currently have a dividend yield of 4.60%.

Darden Restaurants, Inc. owns and operates full service restaurants in the United States and Canada. It operates restaurants under the Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze, Seasons 52, Eddie V's Prime Seafood, and Wildfish Seafood Grille brand names. The company has a P/E ratio of 17.54.

The average volume for Darden Restaurants has been 1,610,400 shares per day over the past 30 days. Darden Restaurants has a market cap of $6.3 billion and is part of the leisure industry. Shares are down 13% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Darden Restaurants 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, increase in stock price during the past year and notable return on equity. 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:
  • DRI's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 4.6%. 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 significantly increased by 505.63% to $86.00 million when compared to the same quarter last year. In addition, DARDEN RESTAURANTS INC has also vastly surpassed the industry average cash flow growth rate of -104.50%.
  • 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.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, DARDEN RESTAURANTS INC's return on equity exceeds 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.

Lorillard

Dividend Yield: 4.50%

Lorillard (NYSE: LO) shares currently have a dividend yield of 4.50%.

Lorillard, Inc. manufactures and sells cigarettes in the United States. The company operates through two segments, Cigarettes and Electronic Cigarettes. The Cigarettes segment manufactures and sells cigarettes. The company has a P/E ratio of 15.38.

The average volume for Lorillard has been 3,152,300 shares per day over the past 30 days. Lorillard has a market cap of $18.0 billion and is part of the tobacco industry. Shares are down 5.8% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Lorillard as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and expanding profit margins. 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 revenue growth came in higher than the industry average of 2.3%. Since the same quarter one year prior, revenues rose by 12.5%. 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.
  • Compared to its closing price of one year ago, LO's share price has jumped by 25.78%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, LO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • LORILLARD INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, LORILLARD INC increased its bottom line by earning $2.81 versus $2.67 in the prior year. This year, the market expects an improvement in earnings ($3.17 versus $2.81).
  • The gross profit margin for LORILLARD INC is rather high; currently it is at 51.83%. Regardless of LO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 19.69% trails the industry average.
  • Net operating cash flow has declined marginally to $553.00 million or 4.32% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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

Verizon Communications

Dividend Yield: 4.50%

Verizon Communications (NYSE: VZ) shares currently have a dividend yield of 4.50%.

Verizon Communications Inc., through its subsidiaries, provides communications, information and entertainment products and services to consumers, businesses, and governmental agencies worldwide. The company has a P/E ratio of 16.49.

The average volume for Verizon Communications has been 13,617,700 shares per day over the past 30 days. Verizon Communications has a market cap of $133.9 billion and is part of the telecommunications industry. Shares are down 5% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Verizon Communications 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, good cash flow from operations and increase in stock price during the past year. 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:
  • VZ's revenue growth has slightly outpaced the industry average of 1.0%. Since the same quarter one year prior, revenues slightly increased by 3.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, VERIZON COMMUNICATIONS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for VERIZON COMMUNICATIONS INC is rather high; currently it is at 61.49%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 16.31% is above that of the industry average.
  • Net operating cash flow has significantly increased by 55.03% to $10,431.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 6.03%.
  • 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.

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

Public Service Enterprise Group

Dividend Yield: 4.30%

Public Service Enterprise Group (NYSE: PEG) shares currently have a dividend yield of 4.30%.

Public Service Enterprise Group Incorporated, through its subsidiaries, operates as an energy company primarily in the northeastern and mid Atlantic United States. The company has a P/E ratio of 13.25.

The average volume for Public Service Enterprise Group has been 4,172,100 shares per day over the past 30 days. Public Service Enterprise Group has a market cap of $16.8 billion and is part of the utilities industry. Shares are up 3% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Public Service Enterprise Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, expanding profit margins, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • PEG's revenue growth has slightly outpaced the industry average of 0.2%. Since the same quarter one year prior, revenues slightly increased by 6.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 40.13% is the gross profit margin for PUBLIC SERVICE ENTRP GRP INC 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 15.27% trails the industry average.
  • Net operating cash flow has increased to $1,092.00 million or 17.04% when compared to the same quarter last year. Despite an increase in cash flow, PUBLIC SERVICE ENTRP GRP INC's average is still marginally south of the industry average growth rate of 26.07%.
  • The debt-to-equity ratio is somewhat low, currently at 0.75, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.47 is very weak and demonstrates a lack of ability to pay short-term obligations.

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

PPL

Dividend Yield: 4.90%

PPL (NYSE: PPL) shares currently have a dividend yield of 4.90%.

PPL Corporation, an energy and utility holding company, engages in the generation, transmission, distribution, and sale of electricity to wholesale and retail customers in the United States and the United Kingdom. The company operates in four segments: Kentucky Regulated, U.K. The company has a P/E ratio of 12.12.

The average volume for PPL has been 4,002,900 shares per day over the past 30 days. PPL has a market cap of $19.1 billion and is part of the utilities industry. Shares are up 0.1% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates PPL 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, attractive valuation levels and increase in stock price during the past year. 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 0.4%. Since the same quarter one year prior, revenues rose by 30.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has increased to $1,276.00 million or 11.24% when compared to the same quarter last year. Despite an increase in cash flow, PPL CORP's average is still marginally south of the industry average growth rate of 20.51%.
  • 37.43% is the gross profit margin for PPL CORP which we consider to be strong. Regardless of PPL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PPL's net profit margin of 13.11% compares favorably to the industry average.
  • 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 Electric Utilities industry average. The net income increased by 15.5% when compared to the same quarter one year prior, going from $355.00 million to $410.00 million.

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

Other helpful dividend tools from TheStreet:

null

More from Markets

Video: There Are Some Big Changes Coming to the PGA Championships in 2019

Video: There Are Some Big Changes Coming to the PGA Championships in 2019

Video: One-on-One With Pluralsight's CEO Following Its Successful IPO

Video: One-on-One With Pluralsight's CEO Following Its Successful IPO

CBS-Viacom Battle Comes to a Head; FDA Approves Novartis Migraine Drug --ICMYI

CBS-Viacom Battle Comes to a Head; FDA Approves Novartis Migraine Drug --ICMYI

Listen: Here's What You Need To Know About ETFs Today (Hint: They're on Fire!)

Listen: Here's What You Need To Know About ETFs Today (Hint: They're on Fire!)

Cramer and His Team Stick to Their Disciplines -- Even When It's Disappointing

Cramer and His Team Stick to Their Disciplines -- Even When It's Disappointing