3 Buy-Rated Dividend Stocks To Check Out: PAA, HLSS, PNNT

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."

Plains All American Pipeline

Dividend Yield: 4.30%

Plains All American Pipeline (NYSE: PAA) shares currently have a dividend yield of 4.30%.

Plains All American Pipeline, L.P., together with its subsidiaries, is engaged in transporting, storing, terminalling, and marketing crude oil, natural gas liquids (NGL), natural gas, and refined products in the United States and Canada. The company has a P/E ratio of 26.28.

The average volume for Plains All American Pipeline has been 795,300 shares per day over the past 30 days. Plains All American Pipeline has a market cap of $21.6 billion and is part of the energy industry. Shares are up 14.1% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Plains All American Pipeline as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 10.0%. 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 where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • PLAINS ALL AMER PIPELNE -LP's earnings per share declined by 42.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PLAINS ALL AMER PIPELNE -LP increased its bottom line by earning $2.80 versus $2.40 in the prior year. For the next year, the market is expecting a contraction of 11.6% in earnings ($2.48 versus $2.80).
  • The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 27.3% when compared to the same quarter one year ago, falling from $528.00 million to $384.00 million.
  • PAA's debt-to-equity ratio of 1.00 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that PAA's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.67 is low and demonstrates weak liquidity.

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

Home Loan Servicing Solutions

Dividend Yield: 8.60%

Home Loan Servicing Solutions (NASDAQ: HLSS) shares currently have a dividend yield of 8.60%.

Home Loan Servicing Solutions, Ltd., through its subsidiaries, engages in the acquisition of mortgage servicing assets. Its mortgage servicing assets consists of servicing advances, mortgage servicing rights, rights to mortgage servicing rights, and other related assets. The company has a P/E ratio of 9.11.

The average volume for Home Loan Servicing Solutions has been 515,900 shares per day over the past 30 days. Home Loan Servicing Solutions has a market cap of $1.6 billion and is part of the real estate industry. Shares are down 3.4% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Home Loan Servicing Solutions 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 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:
  • HLSS's very impressive revenue growth greatly exceeded the industry average of 1.6%. Since the same quarter one year prior, revenues leaped by 95.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • HOME LOAN SERVICING SOLTNS 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, HOME LOAN SERVICING SOLTNS increased its bottom line by earning $1.97 versus $1.23 in the prior year. This year, the market expects an improvement in earnings ($2.50 versus $1.97).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Thrifts & Mortgage Finance industry. The net income increased by 93.8% when compared to the same quarter one year prior, rising from $27.89 million to $54.06 million.
  • The gross profit margin for HOME LOAN SERVICING SOLTNS is currently very high, coming in at 95.46%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 54.86% significantly outperformed against the industry average.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Thrifts & Mortgage Finance industry and the overall market on the basis of return on equity, HOME LOAN SERVICING SOLTNS has outperformed in comparison with the industry average, but has underperformed when compared to that of 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.

Pennant Park Investment Corporation

Dividend Yield: 9.70%

Pennant Park Investment Corporation (NASDAQ: PNNT) shares currently have a dividend yield of 9.70%.

PennantPark Investment Corporation is a publicly listed business development firm specializing in direct and mezzanine investments in middle market companies. It invests in the form of mezzanine debt, senior secured loans, and equity investments. The company has a P/E ratio of 6.61.

The average volume for Pennant Park Investment Corporation has been 741,300 shares per day over the past 30 days. Pennant Park Investment Corporation has a market cap of $770.2 million and is part of the financial services industry. Shares are down 0.1% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Pennant Park Investment Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins, compelling growth in net income and impressive record of earnings per share growth. 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 0.5%. Since the same quarter one year prior, revenues rose by 22.0%. 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 Capital Markets industry and the overall market, PENNANTPARK INVESTMENT CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for PENNANTPARK INVESTMENT CORP is rather high; currently it is at 66.36%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 107.39% 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 50.8% when compared to the same quarter one year prior, rising from $26.97 million to $40.68 million.
  • PENNANTPARK INVESTMENT CORP has improved earnings per share by 48.8% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, PENNANTPARK INVESTMENT CORP increased its bottom line by earning $1.39 versus $1.21 in the prior year. For the next year, the market is expecting a contraction of 18.0% in earnings ($1.14 versus $1.39).

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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