Buy-Rated Dividend Stocks: Top 3 Companies: PBCT, BPL, RAI

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."

People's United Financial

Dividend Yield: 4.50%

People's United Financial (NASDAQ: PBCT) shares currently have a dividend yield of 4.50%.

People's United Financial, Inc. operates as the bank holding company for People's United Bank that provides commercial banking, retail and business banking, and wealth management services to individual, corporate, and municipal customers. The company has a P/E ratio of 18.44.

The average volume for People's United Financial has been 2,915,900 shares per day over the past 30 days. People's United Financial has a market cap of $4.6 billion and is part of the banking industry. Shares are down 1.2% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates People's United Financial as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, reasonable 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:
  • The revenue growth greatly exceeded the industry average of 32.9%. Since the same quarter one year prior, revenues slightly increased by 6.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • PEOPLE'S UNITED FINL INC has improved earnings per share by 20.0% 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, PEOPLE'S UNITED FINL INC increased its bottom line by earning $0.74 versus $0.72 in the prior year. This year, the market expects an improvement in earnings ($0.84 versus $0.74).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Thrifts & Mortgage Finance industry average. The net income increased by 16.4% when compared to the same quarter one year prior, going from $62.10 million to $72.30 million.
  • The gross profit margin for PEOPLE'S UNITED FINL INC is currently very high, coming in at 89.55%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 20.26% trails 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.

Buckeye Partners

Dividend Yield: 5.70%

Buckeye Partners (NYSE: BPL) shares currently have a dividend yield of 5.70%.

Buckeye Partners, L.P. owns and operates liquid petroleum products pipeline systems in the United States. The company operates through four segments: Pipelines & Terminals, Global Marine Terminals, Merchant Services, and Development & Logistics. The company has a P/E ratio of 26.60.

The average volume for Buckeye Partners has been 371,200 shares per day over the past 30 days. Buckeye Partners has a market cap of $9.0 billion and is part of the energy industry. Shares are up 9.6% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Buckeye Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • BPL's very impressive revenue growth greatly exceeded the industry average of 2.6%. Since the same quarter one year prior, revenues leaped by 79.9%. 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.
  • BUCKEYE PARTNERS LP's earnings per share declined by 26.4% 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, BUCKEYE PARTNERS LP increased its bottom line by earning $3.23 versus $2.31 in the prior year. This year, the market expects an improvement in earnings ($3.48 versus $3.23).
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 69.9% when compared to the same quarter one year ago, falling from $76.43 million to $23.02 million.
  • The gross profit margin for BUCKEYE PARTNERS LP is currently extremely low, coming in at 9.17%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.27% trails 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.

Reynolds American

Dividend Yield: 4.60%

Reynolds American (NYSE: RAI) shares currently have a dividend yield of 4.60%.

Reynolds American Inc., through its subsidiaries, manufactures and sells cigarette and other tobacco products in the United States. The company operates through RJR Tobacco, American Snuff, and Santa Fe segments. The company has a P/E ratio of 19.77.

The average volume for Reynolds American has been 2,455,900 shares per day over the past 30 days. Reynolds American has a market cap of $30.8 billion and is part of the tobacco industry. Shares are up 16.5% 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 Reynolds American as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, notable return on equity, good cash flow from operations and expanding profit margins. 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:
  • REYNOLDS AMERICAN INC has improved earnings per share by 9.5% 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, REYNOLDS AMERICAN INC increased its bottom line by earning $3.14 versus $2.24 in the prior year. This year, the market expects an improvement in earnings ($3.38 versus $3.14).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Tobacco industry average. The net income increased by 6.7% when compared to the same quarter one year prior, going from $461.00 million to $492.00 million.
  • 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 Tobacco industry and the overall market, REYNOLDS AMERICAN INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to -$657.00 million or 42.81% when compared to the same quarter last year. In addition, REYNOLDS AMERICAN INC has also vastly surpassed the industry average cash flow growth rate of -30.64%.
  • The gross profit margin for REYNOLDS AMERICAN INC is rather high; currently it is at 56.71%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 22.75% trails 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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