Best Of The Buy-Rated Dividend Stocks: Top 3 Companies: HCP, GA, TEG

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."

HCP

Dividend Yield: 5.80%

HCP (NYSE: HCP) shares currently have a dividend yield of 5.80%.

HCP, Inc. is an independent hybrid real estate investment trust. The fund invests in real estate markets of the United States. The company has a P/E ratio of 19.22.

The average volume for HCP has been 2,984,800 shares per day over the past 30 days. HCP has a market cap of $17.3 billion and is part of the real estate industry. Shares are up 4.3% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates HCP as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, compelling growth in net income, revenue growth, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • HCP INC has improved earnings per share by 10.9% 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, HCP INC increased its bottom line by earning $1.97 versus $1.80 in the prior year. This year, the market expects an improvement in earnings ($2.05 versus $1.97).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry average. The net income increased by 21.6% when compared to the same quarter one year prior, going from $241.03 million to $293.10 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 6.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for HCP INC is rather high; currently it is at 63.37%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 53.24% 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, HCP 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.

Giant Interactive Group

Dividend Yield: 4.10%

Giant Interactive Group (NYSE: GA) shares currently have a dividend yield of 4.10%.

Giant Interactive Group Inc. develops and operates online games in the People's Republic of China. It primarily offers multiplayer online role playing games (MMORPGs). The company operates 13 games, including 10 MMORPGs, 1 casual massively multiplayer online game, and 2 strategy Web games. The company has a P/E ratio of 17.15.

The average volume for Giant Interactive Group has been 1,663,600 shares per day over the past 30 days. Giant Interactive Group has a market cap of $2.7 billion and is part of the computer software & services industry. Shares are up 0.7% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Giant Interactive Group 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, growth in earnings per share and increase in net income. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • GA's revenue growth has slightly outpaced the industry average of 10.6%. Since the same quarter one year prior, revenues rose by 11.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • GA's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, GA has a quick ratio of 2.18, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 82.14% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GA should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • GIANT INTERACTIVE GROUP -ADR has improved earnings per share by 15.0% 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, GIANT INTERACTIVE GROUP -ADR increased its bottom line by earning $0.65 versus $0.59 in the prior year. This year, the market expects an improvement in earnings ($0.93 versus $0.65).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Software industry average. The net income increased by 17.2% when compared to the same quarter one year prior, going from $49.59 million to $58.13 million.

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

Integrys Energy Group

Dividend Yield: 4.80%

Integrys Energy Group (NYSE: TEG) shares currently have a dividend yield of 4.80%.

Integrys Energy Group, Inc. operates as a diversified energy holding company with regulated natural gas and electric utility operations in Illinois, Michigan, Minnesota, and Wisconsin. The company has a P/E ratio of 15.83.

The average volume for Integrys Energy Group has been 425,400 shares per day over the past 30 days. Integrys Energy Group has a market cap of $4.5 billion and is part of the utilities industry. Shares are up 3.5% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Integrys Energy Group as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels, notable return on equity and largely solid financial position with reasonable debt levels by most measures. 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 greatly exceeded the industry average of 32.7%. Since the same quarter one year prior, revenues rose by 21.8%. 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 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 Multi-Utilities industry and the overall market on the basis of return on equity, INTEGRYS ENERGY GROUP INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • TEG's debt-to-equity ratio of 0.99 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further.
  • INTEGRYS ENERGY GROUP INC's earnings per share declined by 48.4% 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, INTEGRYS ENERGY GROUP INC increased its bottom line by earning $3.68 versus $2.88 in the prior year. For the next year, the market is expecting a contraction of 4.9% in earnings ($3.50 versus $3.68).

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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