What To Buy: Top 3 Buy-Rated Dividend Stocks: GOV, MAT, KMP

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."

Government Properties Income

Dividend Yield: 7.70%

Government Properties Income (NYSE: GOV) shares currently have a dividend yield of 7.70%.

Government Properties Income Trust operates as a real estate investment trust (REIT) in the United States. It primarily owns and leases office buildings that are leased mainly to government tenants. The company has a P/E ratio of 23.63.

The average volume for Government Properties Income has been 1,010,500 shares per day over the past 30 days. Government Properties Income has a market cap of $1.6 billion and is part of the real estate industry. Shares are down 10.3% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Government Properties Income as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • GOV's revenue growth has slightly outpaced the industry average of 11.6%. Since the same quarter one year prior, revenues rose by 11.7%. 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.
  • GOVERNMENT PPTYS INCOME TR' earnings per share from the most recent quarter came in slightly below the year earlier quarter. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, GOVERNMENT PPTYS INCOME TR increased its bottom line by earning $1.02 versus $1.01 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $1.02).
  • Net operating cash flow has slightly increased to $29.82 million or 3.36% when compared to the same quarter last year. Despite an increase in cash flow, GOVERNMENT PPTYS INCOME TR's cash flow growth rate is still lower than the industry average growth rate of 18.92%.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, GOV has underperformed the S&P 500 Index, declining 5.45% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

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

Mattel

Dividend Yield: 4.70%

Mattel (NASDAQ: MAT) shares currently have a dividend yield of 4.70%.

Mattel, Inc. designs, manufactures, and markets a range of toy products worldwide. The company operates in three segments: North America, International, and American Girl. It also publishes Advice and Activity books and the American Girl magazine. The company has a P/E ratio of 13.88.

The average volume for Mattel has been 2,839,300 shares per day over the past 30 days. Mattel has a market cap of $10.8 billion and is part of the consumer durables industry. Shares are down 33.4% year-to-date as of the close of trading on Wednesday.

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 Mattel 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, 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 sub par growth in net income.

Highlights from the ratings report include:
  • The debt-to-equity ratio is somewhat low, currently at 0.72, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, MAT has a quick ratio of 1.54, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 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. In comparison to other companies in the Leisure Equipment & Products industry and the overall market on the basis of return on equity, MATTEL INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • Net operating cash flow has increased to -$139.74 million or 37.46% when compared to the same quarter last year. Despite an increase in cash flow of 37.46%, MATTEL INC is still growing at a significantly lower rate than the industry average of 177.27%.
  • The gross profit margin for MATTEL INC is rather high; currently it is at 51.04%. Regardless of MAT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.66% trails the industry average.
  • MAT, with its decline in revenue, underperformed when compared the industry average of 6.4%. Since the same quarter one year prior, revenues slightly dropped by 9.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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

Kinder Morgan Energy Partners

Dividend Yield: 6.00%

Kinder Morgan Energy Partners (NYSE: KMP) shares currently have a dividend yield of 6.00%.

Kinder Morgan Energy Partners, L.P. operates as a pipeline transportation and energy storage company in North America. The company has a P/E ratio of 24.20.

The average volume for Kinder Morgan Energy Partners has been 2,836,200 shares per day over the past 30 days. Kinder Morgan Energy Partners has a market cap of $30.2 billion and is part of the energy industry. Shares are up 15.6% year-to-date as of the close of trading on Wednesday.

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 Kinder Morgan Energy Partners 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 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 3.1%. Since the same quarter one year prior, revenues rose by 18.6%. 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.
  • 39.03% is the gross profit margin for KINDER MORGAN ENERGY -LP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.47% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $1,175.00 million or 20.02% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -5.24%.
  • 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.
  • KINDER MORGAN ENERGY -LP 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, KINDER MORGAN ENERGY -LP increased its bottom line by earning $3.80 versus $1.64 in the prior year. For the next year, the market is expecting a contraction of 30.8% in earnings ($2.63 versus $3.80).

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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