3 Buy-Rated Dividend Stocks: ARI, FDUS, MARPS

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."

Apollo Commercial Real Estate Finance

Dividend Yield: 9.80%

Apollo Commercial Real Estate Finance (NYSE: ARI) shares currently have a dividend yield of 9.80%.

Apollo Commercial Real Estate Finance, Inc. The company has a P/E ratio of 10.19.

The average volume for Apollo Commercial Real Estate Finance has been 335,900 shares per day over the past 30 days. Apollo Commercial Real Estate Finance has a market cap of $768.3 million and is part of the real estate industry. Shares are up 0.6% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Apollo Commercial Real Estate Finance as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, good cash flow from operations, compelling growth in net income and impressive record of earnings per share growth. 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:
  • ARI's very impressive revenue growth greatly exceeded the industry average of 11.6%. Since the same quarter one year prior, revenues leaped by 59.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for APOLLO COMMERCIAL RE FIN INC is currently very high, coming in at 84.70%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 82.48% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $15.72 million or 39.07% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 18.92%.
  • 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 103.2% when compared to the same quarter one year prior, rising from $11.79 million to $23.96 million.
  • APOLLO COMMERCIAL RE FIN INC 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, APOLLO COMMERCIAL RE FIN INC reported lower earnings of $1.26 versus $1.68 in the prior year. This year, the market expects an improvement in earnings ($1.73 versus $1.26).

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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