3 Buy-Rated Dividend Stocks Leading The Pack: STWD, LAMR, PSEC

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."

Starwood Property

Dividend Yield: 8.30%

Starwood Property (NYSE: STWD) shares currently have a dividend yield of 8.30%.

Starwood Property Trust, Inc. originates, acquires, finances, and manages commercial mortgage loans, other commercial real estate debt investments, commercial mortgage-backed securities, and other commercial real estate-related debt investments in the United States and Europe. The company has a P/E ratio of 11.76.

The average volume for Starwood Property has been 2,178,000 shares per day over the past 30 days. Starwood Property has a market cap of $5.1 billion and is part of the real estate industry. Shares are down 16.8% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Starwood Property as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share, compelling growth in net income, attractive valuation levels 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:
  • STWD's very impressive revenue growth greatly exceeded the industry average of 10.3%. Since the same quarter one year prior, revenues leaped by 103.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • STARWOOD PROPERTY TRUST INC has improved earnings per share by 29.8% 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, STARWOOD PROPERTY TRUST INC increased its bottom line by earning $1.83 versus $1.78 in the prior year. This year, the market expects an improvement in earnings ($2.16 versus $1.83).
  • 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 93.8% when compared to the same quarter one year prior, rising from $62.24 million to $120.60 million.
  • The gross profit margin for STARWOOD PROPERTY TRUST INC is rather high; currently it is at 52.84%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, STWD's net profit margin of 70.09% significantly outperformed against the industry.

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

Lamar Advertising

Dividend Yield: 6.30%

Lamar Advertising (NASDAQ: LAMR) shares currently have a dividend yield of 6.30%.

Lamar Advertising Company operates as an outdoor advertising company in the United States. The company has a P/E ratio of 110.46.

The average volume for Lamar Advertising has been 1,499,000 shares per day over the past 30 days. Lamar Advertising has a market cap of $4.3 billion and is part of the media industry. Shares are up 0.2% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Lamar Advertising as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, 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:
  • LAMAR ADVERTISING CO 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, LAMAR ADVERTISING CO increased its bottom line by earning $0.37 versus $0.10 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $0.37).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Media industry. The net income increased by 52.9% when compared to the same quarter one year prior, rising from -$10.26 million to -$4.84 million.
  • LAMR's revenue growth trails the industry average of 14.6%. Since the same quarter one year prior, revenues slightly increased by 3.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has increased to $62.58 million or 21.00% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 5.61%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.

Prospect Capital Corporation

Dividend Yield: 12.40%

Prospect Capital Corporation (NASDAQ: PSEC) shares currently have a dividend yield of 12.40%.

Prospect Capital Corporation is a business development company. The company has a P/E ratio of 8.80.

The average volume for Prospect Capital Corporation has been 6,381,600 shares per day over the past 30 days. Prospect Capital Corporation has a market cap of $3.7 billion and is part of the financial services industry. Shares are down 5.4% 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 robust revenue growth, compelling growth in net income, expanding profit margins, impressive record of earnings per share growth and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • PSEC's very impressive revenue growth greatly exceeded the industry average of 5.2%. Since the same quarter one year prior, revenues leaped by 58.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for PROSPECT CAPITAL CORP is rather high; currently it is at 68.45%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 43.13% 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 84.8% when compared to the same quarter one year prior, rising from $44.43 million to $82.10 million.
  • PROSPECT CAPITAL CORP has improved earnings per share by 30.0% 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, PROSPECT CAPITAL CORP reported lower earnings of $1.07 versus $1.69 in the prior year. This year, the market expects an improvement in earnings ($1.27 versus $1.07).
  • In its most recent trading session, PSEC 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.

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