3 Buy-Rated Dividend Stocks Taking The Lead: GSK, CXW, DRE

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 which could 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."

GlaxoSmithKline

Dividend Yield: 5.70%

GlaxoSmithKline (NYSE: GSK) shares currently have a dividend yield of 5.70%.

GlaxoSmithKline plc creates, discovers, develops, manufactures, and markets pharmaceutical products, such as vaccines, over-the-counter medicines, and health-related consumer products worldwide. The company has a P/E ratio of 18.81.

The average volume for GlaxoSmithKline has been 2,290,200 shares per day over the past 30 days. GlaxoSmithKline has a market cap of $128.8 billion and is part of the drugs industry. Shares are down 0.8% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates GlaxoSmithKline as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, increase in stock price during the past year, impressive record of earnings per share growth and compelling growth in net income. 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 1.3%. Since the same quarter one year prior, revenues rose by 29.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
  • GLAXOSMITHKLINE PLC reported significant earnings per share improvement 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, GLAXOSMITHKLINE PLC increased its bottom line by earning $3.68 versus $2.92 in the prior year. This year, the market expects an improvement in earnings ($3.70 versus $3.68).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 194.2% when compared to the same quarter one year prior, rising from $1,426.48 million to $4,196.37 million.
  • 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 Pharmaceuticals industry and the overall market, GLAXOSMITHKLINE PLC's return on equity significantly 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.

Corrections Corporation of America

Dividend Yield: 6.30%

Corrections Corporation of America (NYSE: CXW) shares currently have a dividend yield of 6.30%.

Corrections Corporation of America, together with its subsidiaries, owns and operates privatized correctional and detention facilities in the United States. The company has a P/E ratio of 12.09.

The average volume for Corrections Corporation of America has been 774,700 shares per day over the past 30 days. Corrections Corporation of America has a market cap of $3.8 billion and is part of the real estate industry. Shares are up 0.4% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Corrections Corporation of America as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, reasonable valuation levels, good cash flow from operations 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:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.8%. Since the same quarter one year prior, revenues slightly increased by 0.8%. 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.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CORRECTIONS CORP AMER's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • Net operating cash flow has increased to $85.90 million or 42.67% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 10.27%.
  • The net income growth from the same quarter one year ago has exceeded that of the Real Estate Investment Trusts (REITs) industry average, but is less than that of the S&P 500. The net income increased by 4.5% when compared to the same quarter one year prior, going from $45.41 million to $47.47 million.

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

Duke Realty

Dividend Yield: 4.10%

Duke Realty (NYSE: DRE) shares currently have a dividend yield of 4.10%.

Duke Realty Corporation operates as a real estate investment trust (REIT) in the United States. It offers leasing, property and asset management, development, construction, build-to-suit, and other tenant-related services. The company has a P/E ratio of 278.67.

The average volume for Duke Realty has been 2,221,600 shares per day over the past 30 days. Duke Realty has a market cap of $5.4 billion and is part of the real estate industry. Shares are up 9.2% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Duke Realty as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, good cash flow from operations, impressive record of earnings per share growth 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:
  • DRE's revenue growth has slightly outpaced the industry average of 6.8%. Since the same quarter one year prior, revenues slightly increased by 9.3%. 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 Real Estate Investment Trusts (REITs) industry. The net income increased by 450.3% when compared to the same quarter one year prior, rising from -$21.96 million to $76.93 million.
  • Net operating cash flow has increased to $118.13 million or 21.00% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 10.27%.
  • DUKE REALTY CORP reported significant earnings per share improvement 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, DUKE REALTY CORP turned its bottom line around by earning $0.06 versus -$0.51 in the prior year. For the next year, the market is expecting a contraction of 491.7% in earnings (-$0.24 versus $0.06).
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, DUKE REALTY CORP underperformed against that of the industry average and is significantly less than that of 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.

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