Buy-Rated Dividend Stocks: Top 3 Companies: RIG, MO, SFUN

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: 8.00%

Transocean (NYSE: RIG) shares currently have a dividend yield of 8.00%.

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 7.52.

The average volume for Transocean has been 5,409,800 shares per day over the past 30 days. Transocean has a market cap of $13.6 billion and is part of the energy industry. Shares are down 24.6% year-to-date as of the close of trading on Monday.

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 Transocean as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, compelling growth in net income, attractive valuation levels, expanding profit margins and good cash flow from operations. 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 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, TRANSOCEAN LTD increased its bottom line by earning $3.88 versus $2.24 in the prior year. This year, the market expects an improvement in earnings ($4.57 versus $3.88).
  • 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 91.2% when compared to the same quarter one year prior, rising from $307.00 million to $587.00 million.
  • 47.90% 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 25.21% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 52.88% to $636.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 27.28%.

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

Altria Group

Dividend Yield: 4.80%

Altria Group (NYSE: MO) shares currently have a dividend yield of 4.80%.

Altria Group, Inc., through its subsidiaries, manufactures and sells cigarettes, smokeless products, and wine in the United States and internationally. The company has a P/E ratio of 20.00.

The average volume for Altria Group has been 6,481,800 shares per day over the past 30 days. Altria Group has a market cap of $86.1 billion and is part of the tobacco industry. Shares are up 13.3% year-to-date as of the close of trading on Monday.

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 Altria Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, growth in earnings per share, solid stock price performance and notable return on equity. 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:
  • MO's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 1.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for ALTRIA GROUP INC is rather high; currently it is at 57.93%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.60% is above that of the industry average.
  • ALTRIA GROUP INC's earnings per share improvement from the most recent quarter was slightly positive. 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, ALTRIA GROUP INC increased its bottom line by earning $2.26 versus $2.06 in the prior year. This year, the market expects an improvement in earnings ($2.57 versus $2.26).
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 26.25% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp 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 other strengths this company displays justify these higher price levels.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Tobacco industry and the overall market, ALTRIA GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.

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

SouFun Holdings

Dividend Yield: 16.00%

SouFun Holdings (NYSE: SFUN) shares currently have a dividend yield of 16.00%.

SouFun Holdings Limited operates a real estate Internet portal, and a home furnishing and an improvement Website in the People's Republic of China. The company has a P/E ratio of 16.85.

The average volume for SouFun Holdings has been 7,554,800 shares per day over the past 30 days. SouFun Holdings has a market cap of $1.0 billion and is part of the internet industry. Shares are down 26.6% year-to-date as of the close of trading on Monday.

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 SouFun Holdings as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income, robust revenue growth, expanding profit margins 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:
  • 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.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Internet Software & Services industry average. The net income increased by 23.2% when compared to the same quarter one year prior, going from $55.37 million to $68.20 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 19.9%. Since the same quarter one year prior, revenues rose by 16.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for SOUFUN HLDGS LTD is currently very high, coming in at 84.28%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 40.55% significantly outperformed against the industry average.
  • SOUFUN HLDGS LTD has improved earnings per share by 11.9% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, SOUFUN HLDGS LTD increased its bottom line by earning $0.71 versus $0.37 in the prior year. For the next year, the market is expecting a contraction of 8.2% in earnings ($0.65 versus $0.71).

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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