3 Buy-Rated Dividend Stocks Leading The Pack: HCP, PBCT, SO

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: 5.60%

HCP (NYSE: HCP) shares currently have a dividend yield of 5.60%.

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 19.68.

The average volume for HCP has been 3,029,500 shares per day over the past 30 days. HCP has a market cap of $17.7 billion and is part of the real estate industry. Shares are up 6.5% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates HCP as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, compelling growth in net income, 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's revenue growth has slightly outpaced the industry average of 6.3%. 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.
  • 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 ($2.07 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.
  • 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.

People's United Financial

Dividend Yield: 4.60%

People's United Financial (NASDAQ: PBCT) shares currently have a dividend yield of 4.60%.

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 18.40.

The average volume for People's United Financial has been 4,302,200 shares per day over the past 30 days. People's United Financial has a market cap of $4.5 billion and is part of the banking industry. Shares are down 6.6% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates People's United Financial as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, reasonable valuation levels, expanding profit margins, 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 sub par growth in net income.

Highlights from the ratings report include:
  • 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 ($0.85 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 stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.
  • The revenue fell significantly faster than the industry average of 230.3%. 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.

Southern

Dividend Yield: 4.80%

Southern (NYSE: SO) shares currently have a dividend yield of 4.80%.

The Southern Company, together with its subsidiaries, operates as a public electric utility company. The company has a P/E ratio of 22.65.

The average volume for Southern has been 4,716,500 shares per day over the past 30 days. Southern has a market cap of $37.6 billion and is part of the utilities industry. Shares are up 2.3% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Southern as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • SO's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 6.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • SOUTHERN CO has improved earnings per share by 9.3% 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, SOUTHERN CO reported lower earnings of $1.87 versus $2.67 in the prior year. This year, the market expects an improvement in earnings ($2.76 versus $1.87).
  • 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 greatly underperformed compared to the Electric Utilities industry average. The net income increased by 8.0% when compared to the same quarter one year prior, going from $399.00 million to $431.00 million.
  • SO has underperformed the S&P 500 Index, declining 6.79% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
  • The gross profit margin for SOUTHERN CO is currently lower than what is desirable, coming in at 33.28%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 10.97% is above that of the industry average.

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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