What To Buy: Top 3 Buy-Rated Dividend Stocks: ETR, DLR, CLNY

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."

Entergy

Dividend Yield: 4.30%

Entergy (NYSE: ETR) shares currently have a dividend yield of 4.30%.

Entergy Corporation, together with its subsidiaries, is engaged in the electric power production and retail electric distribution operations in the United States. It generates electricity through gas/oil, nuclear, coal, and hydro power. The company has a P/E ratio of 14.08.

The average volume for Entergy has been 1,622,600 shares per day over the past 30 days. Entergy has a market cap of $13.8 billion and is part of the utilities industry. Shares are up 22.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Entergy as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, solid stock price performance and growth in earnings per share. 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:
  • ETR's revenue growth has slightly outpaced the industry average of 5.5%. Since the same quarter one year prior, revenues slightly increased by 9.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
  • Net operating cash flow has increased to $761.41 million or 33.13% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -2.46%.
  • ENTERGY CORP has improved earnings per share by 14.1% 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, ENTERGY CORP reported lower earnings of $3.98 versus $4.75 in the prior year. This year, the market expects an improvement in earnings ($6.14 versus $3.98).

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

Digital Realty

Dividend Yield: 5.00%

Digital Realty (NYSE: DLR) shares currently have a dividend yield of 5.00%.

Digital Realty Trust, Inc., a real estate investment trust (REIT), through its controlling interest in Digital Realty Trust, L.P., engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate. The company has a P/E ratio of 32.98.

The average volume for Digital Realty has been 1,102,700 shares per day over the past 30 days. Digital Realty has a market cap of $8.9 billion and is part of the real estate industry. Shares are up 35.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Digital Realty as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, reasonable valuation levels, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • DLR's revenue growth has slightly outpaced the industry average of 10.6%. Since the same quarter one year prior, revenues rose by 10.7%. 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.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry average. The net income increased by 3.2% when compared to the same quarter one year prior, going from $58.48 million to $60.34 million.
  • Net operating cash flow has slightly increased to $198.85 million or 6.64% when compared to the same quarter last year. Despite an increase in cash flow, DIGITAL REALTY TRUST INC's cash flow growth rate is still lower than the industry average growth rate of 17.00%.
  • 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. 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.

Colony Financial

Dividend Yield: 6.50%

Colony Financial (NYSE: CLNY) shares currently have a dividend yield of 6.50%.

Colony Financial, Inc., a real estate investment and finance company, focuses on acquiring, originating, and managing various real estate-related debt and equity investments. The company has a P/E ratio of 18.28.

The average volume for Colony Financial has been 1,227,500 shares per day over the past 30 days. Colony Financial has a market cap of $2.4 billion and is part of the real estate industry. Shares are up 11.6% year-to-date as of the close of trading on Friday.

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 Colony Financial as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, expanding profit margins, good cash flow from operations and increase in stock price during the past year. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • CLNY's very impressive revenue growth greatly exceeded the industry average of 10.6%. Since the same quarter one year prior, revenues leaped by 77.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 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 46.8% when compared to the same quarter one year prior, rising from $25.65 million to $37.65 million.
  • The gross profit margin for COLONY FINANCIAL INC is currently very high, coming in at 78.26%. Regardless of CLNY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CLNY's net profit margin of 47.92% significantly outperformed against the industry.
  • Net operating cash flow has increased to $36.03 million or 13.09% when compared to the same quarter last year. Despite an increase in cash flow, COLONY FINANCIAL INC's average is still marginally south of the industry average growth rate of 17.00%.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.

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