Best Of The Buy-Rated Dividend Stocks: Top 3 Companies: RGP, RRD, RDS.B

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."

Regency Energy Partners

Dividend Yield: 7.00%

Regency Energy Partners (NYSE: RGP) shares currently have a dividend yield of 7.00%.

Regency Energy Partners LP is engaged in the gathering and processing, compression, treating, and transportation of natural gas; and the transportation, fractionation, and storage of natural gas liquids (NGLs). The company has a P/E ratio of 158.29.

The average volume for Regency Energy Partners has been 693,100 shares per day over the past 30 days. Regency Energy Partners has a market cap of $5.8 billion and is part of the energy industry. Shares are up 0.1% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Regency Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income, growth in earnings per share, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. 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 came in higher than the industry average of 7.8%. Since the same quarter one year prior, revenues rose by 15.3%. 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 Oil, Gas & Consumable Fuels industry. The net income increased by 87.5% when compared to the same quarter one year prior, rising from -$8.00 million to -$1.00 million.
  • REGENCY ENERGY PARTNERS LP reported significant earnings per share improvement 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, REGENCY ENERGY PARTNERS LP reported lower earnings of $0.04 versus $0.13 in the prior year. This year, the market expects an improvement in earnings ($0.59 versus $0.04).
  • RGP's debt-to-equity ratio of 0.68 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. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.71 is weak.
  • 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, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

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

R.R. Donnelley & Sons Company

Dividend Yield: 5.70%

R.R. Donnelley & Sons Company (NASDAQ: RRD) shares currently have a dividend yield of 5.70%.

R.R. Donnelley & Sons Company provides integrated communication solutions to private and public sectors worldwide. It operates through Publishing and Retail Services, Variable Print, Strategic Services, and International segments. The company has a P/E ratio of 16.37.

The average volume for R.R. Donnelley & Sons Company has been 2,162,100 shares per day over the past 30 days. R.R. Donnelley & Sons Company has a market cap of $3.6 billion and is part of the diversified services industry. Shares are down 12.8% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates R.R. Donnelley & Sons Company as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • Powered by its strong earnings growth of 111.91% and other important driving factors, this stock has surged by 64.96% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, RRD should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • DONNELLEY (R R) & SONS CO 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, DONNELLEY (R R) & SONS CO turned its bottom line around by earning $1.15 versus -$3.61 in the prior year. This year, the market expects an improvement in earnings ($1.57 versus $1.15).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Services & Supplies industry. The net income increased by 112.2% when compared to the same quarter one year prior, rising from -$849.00 million to $104.00 million.
  • 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 3.6%. 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 Commercial Services & Supplies industry and the overall market, DONNELLEY (R R) & SONS CO'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.

Royal Dutch Shell

Dividend Yield: 4.80%

Royal Dutch Shell (NYSE: RDS.B) shares currently have a dividend yield of 4.80%.

Royal Dutch Shell plc operates as an independent oil and gas company worldwide. The company explores for and extracts crude oil, natural gas, and natural gas liquids. The company has a P/E ratio of 9.69.

The average volume for Royal Dutch Shell has been 1,098,700 shares per day over the past 30 days. Royal Dutch Shell has a market cap of $238.2 billion and is part of the energy industry. Shares are up 1.8% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Royal Dutch Shell as a buy. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, increase in stock price during the past year 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:
  • 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.
  • RDS.B's debt-to-equity ratio is very low at 0.25 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.79 is somewhat weak and could be cause for future problems.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.8%. Since the same quarter one year prior, revenues slightly dropped by 7.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • ROYAL DUTCH SHELL PLC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ROYAL DUTCH SHELL PLC reported lower earnings of $5.18 versus $8.52 in the prior year. This year, the market expects an improvement in earnings ($14.07 versus $5.18).

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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