What To Buy: Top 3 Buy-Rated Dividend Stocks: RIG, OKS, CIM

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."

Transocean

Dividend Yield: 7.60%

Transocean (NYSE: RIG) shares currently have a dividend yield of 7.60%.

Transocean Ltd., together with its subsidiaries, provides offshore contract drilling services for oil and gas wells worldwide. The company provides deepwater and harsh environment drilling, oil and gas drilling management, and drilling engineering and drilling project management services. The company has a P/E ratio of 9.29.

The average volume for Transocean has been 4,460,500 shares per day over the past 30 days. Transocean has a market cap of $14.3 billion and is part of the energy industry. Shares are down 20.1% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Transocean 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, 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:
  • TRANSOCEAN LTD has improved earnings per share by 42.7% 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, TRANSOCEAN LTD increased its bottom line by earning $3.87 versus $2.24 in the prior year. This year, the market expects an improvement in earnings ($4.21 versus $3.87).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 42.0% when compared to the same quarter one year prior, rising from $321.00 million to $456.00 million.
  • RIG's revenue growth trails the industry average of 21.4%. Since the same quarter one year prior, revenues slightly increased by 7.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 45.75% is the gross profit margin for TRANSOCEAN LTD which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.49% is above that of the industry average.

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

ONEOK Partners

Dividend Yield: 5.30%

ONEOK Partners (NYSE: OKS) shares currently have a dividend yield of 5.30%.

ONEOK Partners, L.P. is engaged in the gathering, processing, storage, and transportation of natural gas in the United States. It operates in three segments: Natural Gas Gathering and Processing, Natural Gas Liquids, and Natural Gas Pipelines. The company has a P/E ratio of 20.92.

The average volume for ONEOK Partners has been 755,100 shares per day over the past 30 days. ONEOK Partners has a market cap of $9.2 billion and is part of the energy industry. Shares are up 8.8% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates ONEOK Partners 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, increase in stock price during the past year and increase 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:
  • The revenue growth came in higher than the industry average of 1.5%. Since the same quarter one year prior, revenues rose by 25.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • 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 69.5% when compared to the same quarter one year prior, rising from $156.60 million to $265.39 million.
  • Net operating cash flow has significantly increased by 153.06% to $459.16 million when compared to the same quarter last year. In addition, ONEOK PARTNERS -LP has also vastly surpassed the industry average cash flow growth rate of 18.80%.

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

Chimera Investment

Dividend Yield: 11.20%

Chimera Investment (NYSE: CIM) shares currently have a dividend yield of 11.20%.

Chimera Investment Corporation operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 8.68.

The average volume for Chimera Investment has been 4,901,700 shares per day over the past 30 days. Chimera Investment has a market cap of $3.3 billion and is part of the real estate industry. Shares are up 3.5% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Chimera Investment as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, attractive valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • CIM's revenue growth has slightly outpaced the industry average of 9.5%. Since the same quarter one year prior, revenues rose by 16.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • CHIMERA INVESTMENT CORP has improved earnings per share by 25.0% 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, CHIMERA INVESTMENT CORP increased its bottom line by earning $0.35 versus $0.32 in the prior year. This year, the market expects an improvement in earnings ($0.36 versus $0.35).
  • 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 25.8% when compared to the same quarter one year prior, rising from $79.80 million to $100.37 million.
  • The gross profit margin for CHIMERA INVESTMENT CORP is currently very high, coming in at 91.95%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 72.56% significantly outperformed against the industry average.

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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