Top 3 Yielding Buy-Rated Stocks: HCP, PSEC, HIW

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."

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 18.81.

The average volume for HCP has been 3,266,500 shares per day over the past 30 days. HCP has a market cap of $17.8 billion and is part of the real estate industry. Shares are up 6.8% year-to-date as of the close of trading on Tuesday.

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 shows weak operating cash flow.

Highlights from the ratings report include:
  • HCP's revenue growth has slightly outpaced the industry average of 6.9%. 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 greatly outperformed compared to 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.

Prospect Capital Corporation

Dividend Yield: 12.30%

Prospect Capital Corporation (NASDAQ: PSEC) shares currently have a dividend yield of 12.30%.

Prospect Capital Corporation is a business development company. The company has a P/E ratio of 9.30.

The average volume for Prospect Capital Corporation has been 4,800,300 shares per day over the past 30 days. Prospect Capital Corporation has a market cap of $3.4 billion and is part of the financial services industry. Shares are down 3.7% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Prospect Capital Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, attractive valuation levels, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.7%. Since the same quarter one year prior, revenues slightly increased by 7.3%. 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 Capital Markets industry. The net income increased by 83.6% when compared to the same quarter one year prior, rising from $46.49 million to $85.36 million.
  • The gross profit margin for PROSPECT CAPITAL CORP is rather high; currently it is at 68.21%. Regardless of PSEC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PSEC's net profit margin of 47.93% significantly outperformed against the industry.
  • Net operating cash flow has significantly increased by 52.42% to -$290.63 million when compared to the same quarter last year. Despite an increase in cash flow, PROSPECT CAPITAL CORP's cash flow growth rate is still lower than the industry average growth rate of 93.28%.

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

Highwoods Properties

Dividend Yield: 4.40%

Highwoods Properties (NYSE: HIW) shares currently have a dividend yield of 4.40%.

Highwoods Properties, Inc. is a real estate investment trust. The trust engages in leasing, management, development, construction, and other customer-related services for its properties and for third parties. It invests in the real estate markets of United States. The company has a P/E ratio of 56.85.

The average volume for Highwoods Properties has been 695,400 shares per day over the past 30 days. Highwoods Properties has a market cap of $3.5 billion and is part of the real estate industry. Shares are up 6.2% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Highwoods Properties as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 6.9%. Since the same quarter one year prior, revenues rose by 21.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • HIGHWOODS PROPERTIES INC 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, HIGHWOODS PROPERTIES INC increased its bottom line by earning $0.67 versus $0.46 in the prior year. This year, the market expects an improvement in earnings ($0.74 versus $0.67).
  • 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 106.5% when compared to the same quarter one year prior, rising from $14.70 million to $30.36 million.
  • Net operating cash flow has increased to $69.95 million or 26.26% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 10.91%.

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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