3 Buy-Rated Dividend Stocks: MPW, ORI, 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."

Medical Properties

Dividend Yield: 6.50%

Medical Properties (NYSE: MPW) shares currently have a dividend yield of 6.50%.

Medical Properties Trust, Inc. operates as a real estate investment trust (REIT) in the United States. It acquires, develops, and invests in healthcare facilities; and leases healthcare facilities to healthcare operating companies and healthcare providers. The company has a P/E ratio of 45.86.

The average volume for Medical Properties has been 1,228,600 shares per day over the past 30 days. Medical Properties has a market cap of $2.2 billion and is part of the real estate industry. Shares are up 3% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Medical Properties as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, 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 sub par growth in net income.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 11.6%. Since the same quarter one year prior, revenues rose by 32.5%. 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.
  • Net operating cash flow has slightly increased to $31.97 million or 9.51% when compared to the same quarter last year. Despite an increase in cash flow, MEDICAL PROPERTIES TRUST's average is still marginally south of the industry average growth rate of 18.92%.
  • MEDICAL PROPERTIES TRUST 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 not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, MEDICAL PROPERTIES TRUST increased its bottom line by earning $0.58 versus $0.54 in the prior year.
  • In its most recent trading session, MPW has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 100.7% when compared to the same quarter one year ago, falling from $27.35 million to -$0.20 million.

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: 4.90%

Old Republic International Corporation (NYSE: ORI) shares currently have a dividend yield of 4.90%.

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 9.31.

The average volume for Old Republic International Corporation has been 1,517,500 shares per day over the past 30 days. Old Republic International Corporation has a market cap of $3.9 billion and is part of the insurance industry. Shares are down 15% 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 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:
  • ORI's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • 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.
  • The revenue fell significantly faster than the industry average of 24.1%. 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.

Reynolds American

Dividend Yield: 4.70%

Reynolds American (NYSE: RAI) shares currently have a dividend yield of 4.70%.

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 19.63.

The average volume for Reynolds American has been 2,329,900 shares per day over the past 30 days. Reynolds American has a market cap of $30.6 billion and is part of the tobacco industry. Shares are up 15% 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 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 -31.02%.
  • 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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