What To Buy: Top 3 Buy-Rated Dividend Stocks: HCN, PDLI, EEP

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."

Health Care REIT

Dividend Yield: 4.90%

Health Care REIT (NYSE: HCN) shares currently have a dividend yield of 4.90%.

Health Care REIT, Inc. is an independent equity real estate investment trust. The firm engages in acquiring, planning, developing, managing, repositioning and monetizing of real estate assets. It primarily invests in the real estate markets of the United States. The company has a P/E ratio of 169.92.

The average volume for Health Care REIT has been 2,191,200 shares per day over the past 30 days. Health Care REIT has a market cap of $18.8 billion and is part of the real estate industry. Shares are up 20.8% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Health Care REIT 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, good cash flow from operations and notable return on equity. 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 10.3%. Since the same quarter one year prior, revenues rose by 26.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • HEALTH CARE REIT INC 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, HEALTH CARE REIT INC reported lower earnings of $0.09 versus $0.46 in the prior year. This year, the market expects an improvement in earnings ($0.84 versus $0.09).
  • Net operating cash flow has increased to $258.66 million or 29.45% when compared to the same quarter last year. Despite an increase in cash flow, HEALTH CARE REIT INC's average is still marginally south of the industry average growth rate of 29.73%.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, HEALTH CARE REIT INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The change in net income 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 has decreased by 7.4% when compared to the same quarter one year ago, dropping from $71.66 million to $66.38 million.

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

PDL BioPharma

Dividend Yield: 6.20%

PDL BioPharma (NASDAQ: PDLI) shares currently have a dividend yield of 6.20%.

PDL BioPharma, Inc. manages a portfolio of patents and royalty assets. The company is involved in the humanization of monoclonal antibodies and the discovery of a new generation of targeted treatments for cancer and immunologic diseases. It offers Queen et al. The company has a P/E ratio of 5.55.

The average volume for PDL BioPharma has been 2,139,400 shares per day over the past 30 days. PDL BioPharma has a market cap of $1.6 billion and is part of the drugs industry. Shares are up 12% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates PDL BioPharma as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, robust revenue growth, increase in stock price during the past year, impressive record of earnings per share growth and compelling growth in net income. 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:
  • Compared to other companies in the Biotechnology industry and the overall market, PDL BIOPHARMA INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • PDLI's very impressive revenue growth exceeded the industry average of 26.6%. Since the same quarter one year prior, revenues leaped by 52.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
  • PDL BIOPHARMA INC has improved earnings per share by 22.2% 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, PDL BIOPHARMA INC increased its bottom line by earning $1.73 versus $1.47 in the prior year. This year, the market expects an improvement in earnings ($2.06 versus $1.73).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Biotechnology industry average. The net income increased by 36.3% when compared to the same quarter one year prior, rising from $53.47 million to $72.88 million.

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: 6.10%

Enbridge Energy Partners (NYSE: EEP) shares currently have a dividend yield of 6.10%.

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 236.00.

The average volume for Enbridge Energy Partners has been 908,200 shares per day over the past 30 days. Enbridge Energy Partners has a market cap of $9.0 billion and is part of the energy industry. Shares are up 18.8% 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 3.4%. 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 17.02%.
  • 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 ($0.96 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.

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