3 Buy-Rated Dividend Stocks: LHO, DLR, GSK

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."

LaSalle Hotel Properties

Dividend Yield: 4.60%

LaSalle Hotel Properties (NYSE: LHO) shares currently have a dividend yield of 4.60%.

LaSalle Hotel Properties, a real estate investment trust (REIT), engages in the purchase, ownership, redevelopment, and leasing of primarily upscale and luxury full-service hotels in convention, resort, and urban business markets in the United States. The company has a P/E ratio of 45.14.

The average volume for LaSalle Hotel Properties has been 731,500 shares per day over the past 30 days. LaSalle Hotel Properties has a market cap of $3.4 billion and is part of the real estate industry. Shares are up 7.2% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates LaSalle Hotel Properties as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, reasonable valuation levels, good cash flow from operations 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:
  • LHO's revenue growth has slightly outpaced the industry average of 8.3%. Since the same quarter one year prior, revenues rose by 13.7%. 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.
  • Compared to its closing price of one year ago, LHO's share price has jumped by 28.25%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, LHO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has slightly increased to $23.12 million or 3.80% when compared to the same quarter last year. In addition, LASALLE HOTEL PROPERTIES has also vastly surpassed the industry average cash flow growth rate of -70.87%.
  • LASALLE HOTEL PROPERTIES's earnings per share declined by 12.5% 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, LASALLE HOTEL PROPERTIES increased its bottom line by earning $0.73 versus $0.52 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus $0.73).

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

Digital Realty

Dividend Yield: 6.00%

Digital Realty (NYSE: DLR) shares currently have a dividend yield of 6.00%.

Digital Realty Trust, Inc., a real estate investment trust (REIT), through its controlling interest in Digital Realty Trust, L.P., engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate. The company has a P/E ratio of 27.35.

The average volume for Digital Realty has been 1,657,600 shares per day over the past 30 days. Digital Realty has a market cap of $7.2 billion and is part of the real estate industry. Shares are up 14.5% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Digital Realty as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, increase in net income and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • DLR's revenue growth has slightly outpaced the industry average of 8.3%. Since the same quarter one year prior, revenues slightly increased by 9.3%. 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.
  • Net operating cash flow has slightly increased to $202.31 million or 8.52% when compared to the same quarter last year. In addition, DIGITAL REALTY TRUST INC has also vastly surpassed the industry average cash flow growth rate of -70.87%.
  • 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 0.3% when compared to the same quarter one year prior, going from $54.57 million to $54.70 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, DIGITAL REALTY TRUST 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.

GlaxoSmithKline

Dividend Yield: 4.60%

GlaxoSmithKline (NYSE: GSK) shares currently have a dividend yield of 4.60%.

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 19.06.

The average volume for GlaxoSmithKline has been 2,453,600 shares per day over the past 30 days. GlaxoSmithKline has a market cap of $134.6 billion and is part of the drugs industry. Shares are up 2.8% 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, compelling growth in net income, good cash flow from operations and increase in stock price during the past year. 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 greatly exceeded the industry average of 2.3%. 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.
  • 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.
  • 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.
  • Net operating cash flow has increased to $3,823.62 million or 21.59% when compared to the same quarter last year. In addition, GLAXOSMITHKLINE PLC has also vastly surpassed the industry average cash flow growth rate of -40.05%.
  • 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.

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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