Best Of The Buy-Rated Dividend Stocks: Top 3 Companies: SIR, NHI, VNR

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."

Select Income REIT

Dividend Yield: 6.80%

Select Income REIT (NYSE: SIR) shares currently have a dividend yield of 6.80%.

Select Income REIT is a real estate investment trust managed by Reit Management & Research LLC. The firm invests in the real estate markets of United States with a focus on Hawaii. The fund seeks to invest in office and industrial properties. Select Income REIT is domiciled in United States. The company has a P/E ratio of 14.11.

The average volume for Select Income REIT has been 435,900 shares per day over the past 30 days. Select Income REIT has a market cap of $1.4 billion and is part of the real estate industry. Shares are up 7% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Select Income REIT as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels, good cash flow from operations, expanding profit margins and increase in net income. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 20.5%. 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 increased to $31.30 million or 48.11% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 29.99%.
  • The gross profit margin for SELECT INCOME REIT is rather high; currently it is at 59.35%. Regardless of SIR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SIR's net profit margin of 47.34% significantly outperformed against the industry.
  • 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 10.7% when compared to the same quarter one year prior, going from $22.63 million to $25.06 million.

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

National Health Investors

Dividend Yield: 5.00%

National Health Investors (NYSE: NHI) shares currently have a dividend yield of 5.00%.

National Health Investors, Inc., a real estate investment trust (REIT), invests in health care properties, primarily in the long-term care industry in the United States. The company has a P/E ratio of 20.83.

The average volume for National Health Investors has been 176,100 shares per day over the past 30 days. National Health Investors has a market cap of $2.1 billion and is part of the real estate industry. Shares are up 9.9% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates National Health Investors as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, 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 somewhat disappointing return on equity.

Highlights from the ratings report include:
  • NHI's very impressive revenue growth greatly exceeded the industry average of 10.3%. Since the same quarter one year prior, revenues leaped by 59.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • NATIONAL HEALTH INVESTORS has improved earnings per share by 42.0% 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, NATIONAL HEALTH INVESTORS increased its bottom line by earning $2.73 versus $2.61 in the prior year. This year, the market expects an improvement in earnings ($3.23 versus $2.73).
  • 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 49.5% when compared to the same quarter one year prior, rising from $15.74 million to $23.53 million.
  • The gross profit margin for NATIONAL HEALTH INVESTORS is currently very high, coming in at 71.01%. It has increased significantly from the same period last year. Along with this, the net profit margin of 54.35% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $28.88 million or 21.09% when compared to the same quarter last year. Despite an increase in cash flow, NATIONAL HEALTH INVESTORS's average is still marginally south of the industry average growth rate of 29.99%.

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

Vanguard Natural Resources

Dividend Yield: 8.20%

Vanguard Natural Resources (NASDAQ: VNR) shares currently have a dividend yield of 8.20%.

Vanguard Natural Resources, LLC, through its subsidiaries, acquires and develops oil and natural gas properties in the United States. The company has a P/E ratio of 22.85.

The average volume for Vanguard Natural Resources has been 349,500 shares per day over the past 30 days. Vanguard Natural Resources has a market cap of $2.5 billion and is part of the energy industry. Shares are up 5.2% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Vanguard Natural Resources as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins 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 greatly exceeded the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 43.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • VANGUARD NATURAL RESOURCES 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 year. We feel that this trend should continue. During the past fiscal year, VANGUARD NATURAL RESOURCES turned its bottom line around by earning $0.75 versus -$2.76 in the prior year. This year, the market expects an improvement in earnings ($1.41 versus $0.75).
  • 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 155.9% when compared to the same quarter one year prior, rising from -$27.02 million to $15.12 million.
  • The gross profit margin for VANGUARD NATURAL RESOURCES is rather high; currently it is at 53.00%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 15.63% is above that of the industry average.
  • Net operating cash flow has increased to $79.66 million or 36.77% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 17.43%.

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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