What To Buy: Top 3 Buy-Rated Dividend Stocks: DFT, GSK, ORI

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."

Dupont Fabros Technology

Dividend Yield: 5.10%

Dupont Fabros Technology (NYSE: DFT) shares currently have a dividend yield of 5.10%.

DuPont Fabros Technology, Inc., a real estate investment trust (REIT), engages in the ownership, acquisition, development, operation, management, and lease of large-scale data center facilities in the United States. The company has a P/E ratio of 42.03.

The average volume for Dupont Fabros Technology has been 574,800 shares per day over the past 30 days. Dupont Fabros Technology has a market cap of $1.8 billion and is part of the real estate industry. Shares are up 10.6% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Dupont Fabros Technology as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, reasonable valuation levels, expanding profit margins and good cash flow from operations. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:
  • DFT's revenue growth has slightly outpaced the industry average of 10.5%. Since the same quarter one year prior, revenues rose by 11.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. 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.
  • 40.91% is the gross profit margin for DUPONT FABROS TECHNOLOGY INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.38% is above that of the industry average.
  • Net operating cash flow has significantly increased by 95.22% to $74.14 million when compared to the same quarter last year. In addition, DUPONT FABROS TECHNOLOGY INC has also vastly surpassed the industry average cash flow growth rate of -42.37%.

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

GlaxoSmithKline

Dividend Yield: 5.60%

GlaxoSmithKline (NYSE: GSK) shares currently have a dividend yield of 5.60%.

GlaxoSmithKline plc creates, discovers, develops, manufactures, and markets pharmaceutical products, such as vaccines, over-the-counter medicines, and health-related consumer products worldwide. The company has a P/E ratio of 15.93.

The average volume for GlaxoSmithKline has been 3,109,900 shares per day over the past 30 days. GlaxoSmithKline has a market cap of $111.3 billion and is part of the drugs industry. Shares are down 13.2% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates GlaxoSmithKline as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, GLAXOSMITHKLINE PLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • GLAXOSMITHKLINE PLC's earnings per share declined by 26.1% 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, GLAXOSMITHKLINE PLC increased its bottom line by earning $3.68 versus $2.92 in the prior year. This year, the market expects an improvement in earnings ($97.65 versus $3.68).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 4.6%. Since the same quarter one year prior, revenues slightly dropped by 1.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for GLAXOSMITHKLINE PLC is currently very high, coming in at 70.72%. Regardless of GSK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 11.43% trails the industry average.
  • The share price of GLAXOSMITHKLINE PLC has not done very well: it is down 10.18% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

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

Old Republic International Corporation

Dividend Yield: 5.10%

Old Republic International Corporation (NYSE: ORI) shares currently have a dividend yield of 5.10%.

Old Republic International Corporation, through its subsidiaries, is engaged in underwriting insurance products primarily in the United States and Canada. The company has a P/E ratio of 8.95.

The average volume for Old Republic International Corporation has been 1,530,000 shares per day over the past 30 days. Old Republic International Corporation has a market cap of $3.7 billion and is part of the insurance industry. Shares are down 17.1% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Old Republic International Corporation as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Although ORI's debt-to-equity ratio of 0.14 is very low, it is currently higher than that of 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 Insurance industry and the overall market on the basis of return on equity, OLD REPUBLIC INTL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • ORI, with its decline in revenue, underperformed when compared the industry average of 10.6%. Since the same quarter one year prior, revenues slightly dropped by 8.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • OLD REPUBLIC INTL CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, OLD REPUBLIC INTL CORP turned its bottom line around by earning $1.57 versus -$0.27 in the prior year. For the next year, the market is expecting a contraction of 39.5% in earnings ($0.95 versus $1.57).

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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