What To Buy: Top 3 Buy-Rated Dividend Stocks: RYN, GSK, RDS.A

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."

Rayonier

Dividend Yield: 4.40%

Rayonier (NYSE: RYN) shares currently have a dividend yield of 4.40%.

Rayonier, Inc. engages in the sale and development of real estate and timberland management, as well as in the production and sale of cellulose fibers in the United States, New Zealand, and Australia. The company has a P/E ratio of 17.90.

The average volume for Rayonier has been 898,500 shares per day over the past 30 days. Rayonier has a market cap of $5.7 billion and is part of the materials & construction industry. Shares are up 5.9% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Rayonier as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, good cash flow from operations, increase in net income and expanding profit margins. 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 6.7%. Since the same quarter one year prior, revenues rose by 26.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the 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. In comparison to the other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RAYONIER INC'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 significantly increased by 128.60% to $210.94 million when compared to the same quarter last year. In addition, RAYONIER INC has also vastly surpassed the industry average cash flow growth rate of 11.12%.
  • 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 5.3% when compared to the same quarter one year prior, going from $75.61 million to $79.65 million.
  • 35.23% is the gross profit margin for RAYONIER INC which we consider to be strong. Regardless of RYN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 15.31% trails 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.

GlaxoSmithKline

Dividend Yield: 5.60%

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

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 2,479,400 shares per day over the past 30 days. GlaxoSmithKline has a market cap of $129.7 billion and is part of the drugs industry. Shares are down 1.6% year-to-date as of the close of trading on Thursday.

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, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. 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 0.5%. 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.
  • 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.
  • Net operating cash flow has increased to $3,823.62 million or 21.59% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 11.22%.

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.A) 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 9.14.

The average volume for Royal Dutch Shell has been 2,574,400 shares per day over the past 30 days. Royal Dutch Shell has a market cap of $234.4 billion and is part of the energy industry. Shares are up 3% year-to-date as of the close of trading on Thursday.

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.A'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. Despite the fact that RDS.A's debt-to-equity ratio is low, the quick ratio, which is currently 0.64, displays a potential problem in covering short-term cash needs.
  • 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 ($13.86 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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