3 Buy-Rated Dividend Stocks To Check Out: AI, EEP, 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."

Arlington Asset Investment

Dividend Yield: 12.60%

Arlington Asset Investment (NYSE: AI) shares currently have a dividend yield of 12.60%.

Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The company has a P/E ratio of 8.58.

The average volume for Arlington Asset Investment has been 326,100 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $533.9 million and is part of the real estate industry. Shares are up 5.5% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Arlington Asset Investment as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, increase in net income, growth in earnings per share 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:
  • AI's very impressive revenue growth greatly exceeded the industry average of 5.2%. Since the same quarter one year prior, revenues leaped by 274.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for ARLINGTON ASSET INVESTMENT is currently very high, coming in at 76.86%. It has increased significantly from the same period last year. Along with this, the net profit margin of 39.16% significantly outperformed against the industry average.
  • 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 121.4% when compared to the same quarter one year prior, rising from $3.18 million to $7.03 million.
  • ARLINGTON ASSET INVESTMENT 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, ARLINGTON ASSET INVESTMENT reported lower earnings of $2.96 versus $15.11 in the prior year. This year, the market expects an improvement in earnings ($4.16 versus $2.96).
  • In its most recent trading session, AI has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.

Enbridge Energy Partners

Dividend Yield: 7.00%

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

Enbridge Energy Partners, L.P. owns and operates crude oil and liquid petroleum transportation and storage assets; and natural gas gathering, treating, processing, transportation, and marketing assets in the United States. It operates through three segments: Liquids, Natural Gas, and Marketing. The company has a P/E ratio of 206.27.

The average volume for Enbridge Energy Partners has been 726,400 shares per day over the past 30 days. Enbridge Energy Partners has a market cap of $7.9 billion and is part of the energy industry. Shares are up 17.5% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Enbridge Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, growth in earnings per share 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 came in higher than the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 22.8%. Growth in the company's revenue appears to have helped boost 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 243.3% when compared to the same quarter one year prior, rising from -$83.30 million to $119.40 million.
  • Net operating cash flow has slightly increased to $210.80 million or 2.37% when compared to the same quarter last year. Despite an increase in cash flow, ENBRIDGE ENERGY PRTNRS -LP's cash flow growth rate is still lower than the industry average growth rate of 17.38%.
  • ENBRIDGE ENERGY PRTNRS -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, ENBRIDGE ENERGY PRTNRS -LP swung to a loss, reporting -$0.38 versus $1.25 in the prior year. This year, the market expects an improvement in earnings ($0.93 versus -$0.38).
  • 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.

Royal Dutch Shell

Dividend Yield: 4.60%

Royal Dutch Shell (NYSE: RDS.A) shares currently have a dividend yield of 4.60%.

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 10.38.

The average volume for Royal Dutch Shell has been 2,129,800 shares per day over the past 30 days. Royal Dutch Shell has a market cap of $261.5 billion and is part of the energy industry. Shares are up 15% 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 attractive valuation levels, good cash flow from operations, solid stock price performance 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:
  • Net operating cash flow has increased to $13,984.00 million or 20.97% when compared to the same quarter last year. In addition, ROYAL DUTCH SHELL PLC has also modestly surpassed the industry average cash flow growth rate of 17.38%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.82 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 3.1%. Since the same quarter one year prior, revenues slightly dropped by 2.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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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