What To Buy: Top 3 Buy-Rated Dividend Stocks: RDS.A, SBRA, KKR

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."

Royal Dutch Shell

Dividend Yield: 4.80%

Royal Dutch Shell (NYSE: RDS.A) shares currently have a dividend yield of 4.80%.

Royal Dutch Shell plc operates as an independent oil and gas company worldwide. The company explores for and extracts crude oil, natural gas, and natural gas liquids. The company has a P/E ratio of 10.00.

The average volume for Royal Dutch Shell has been 1,692,400 shares per day over the past 30 days. Royal Dutch Shell has a market cap of $252.3 billion and is part of the energy industry. Shares are up 10.9% year-to-date as of the close of trading on Thursday.

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

TheStreet Ratings rates Royal Dutch Shell as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, attractive valuation levels, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • Powered by its strong earnings growth of 211.11% and other important driving factors, this stock has surged by 25.67% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, RDS.A should continue to move higher despite the fact that it has already enjoyed a very nice gain in 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 205.5% when compared to the same quarter one year prior, rising from $1,737.00 million to $5,307.00 million.
  • RDS.A's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.85 is somewhat weak and could be cause for future problems.
  • ROYAL DUTCH SHELL PLC 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, ROYAL DUTCH SHELL PLC reported lower earnings of $5.18 versus $8.52 in the prior year. This year, the market expects an improvement in earnings ($15.03 versus $5.18).

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

Sabra Health Care REIT

Dividend Yield: 5.50%

Sabra Health Care REIT (NASDAQ: SBRA) shares currently have a dividend yield of 5.50%.

Sabra Health Care REIT, Inc. operates as a real estate investment trust in the United States. The company, through its subsidiaries, owns and invests in real estate properties for the healthcare industry. The company has a P/E ratio of 47.81.

The average volume for Sabra Health Care REIT has been 372,000 shares per day over the past 30 days. Sabra Health Care REIT has a market cap of $1.3 billion and is part of the real estate industry. Shares are up 6.1% year-to-date as of the close of trading on Thursday.

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

TheStreet Ratings rates Sabra 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, compelling growth in net income, 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 somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.5%. Since the same quarter one year prior, revenues rose by 33.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SABRA HEALTH CARE REIT INC 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, SABRA HEALTH CARE REIT INC increased its bottom line by earning $0.67 versus $0.53 in the prior year. This year, the market expects an improvement in earnings ($0.87 versus $0.67).
  • 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 2335.8% when compared to the same quarter one year prior, rising from -$0.66 million to $14.80 million.
  • Net operating cash flow has significantly increased by 1903.90% to $27.71 million when compared to the same quarter last year. In addition, SABRA HEALTH CARE REIT INC has also vastly surpassed the industry average cash flow growth rate of -42.37%.
  • 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. 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.

KKR

Dividend Yield: 11.50%

KKR (NYSE: KKR) shares currently have a dividend yield of 11.50%.

Kohlberg Kravis Roberts & Co. is a private equity investment firm specializing in acquisitions, leveraged buyouts, management buyouts, special situations, growth equity, mature, mezzanine, distressed, and middle market investments. The company has a P/E ratio of 8.81.

The average volume for KKR has been 2,495,000 shares per day over the past 30 days. KKR has a market cap of $9.7 billion and is part of the financial services industry. Shares are down 4.4% year-to-date as of the close of trading on Thursday.

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

TheStreet Ratings rates KKR as a buy. The company's strengths can be seen in multiple areas, such as its 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 shows low profit margins.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 2.6%. Since the same quarter one year prior, revenues rose by 46.5%. 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. 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.
  • KKR & CO LP 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 year. We feel that this trend should continue. During the past fiscal year, KKR & CO LP increased its bottom line by earning $2.29 versus $2.23 in the prior year. This year, the market expects an improvement in earnings ($2.59 versus $2.29).
  • 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 1077.6% when compared to the same quarter one year prior, rising from $15.13 million to $178.22 million.
  • The gross profit margin for KKR & CO LP is rather low; currently it is at 20.70%. It has decreased significantly from the same period last year. Regardless of the weak results of the gross profit margin, the net profit margin of 24.14% 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.

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