3 Buy-Rated Dividend Stocks Taking The Lead: LAMR, LO, AINV

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."

Lamar Advertising

Dividend Yield: 6.80%

Lamar Advertising (NASDAQ: LAMR) shares currently have a dividend yield of 6.80%.

Lamar Advertising Company operates as an outdoor advertising company in the United States. The company has a P/E ratio of 121.92.

The average volume for Lamar Advertising has been 1,276,200 shares per day over the past 30 days. Lamar Advertising has a market cap of $3.9 billion and is part of the media industry. Shares are down 5.7% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Lamar Advertising as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, expanding profit margins 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:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.1%. Since the same quarter one year prior, revenues slightly increased by 0.8%. 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 increased to $110.85 million or 10.59% when compared to the same quarter last year. In addition, LAMAR ADVERTISING CO has also modestly surpassed the industry average cash flow growth rate of 5.77%.
  • LAMAR ADVERTISING CO's earnings per share declined by 33.3% 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, LAMAR ADVERTISING CO increased its bottom line by earning $0.42 versus $0.10 in the prior year. This year, the market expects an improvement in earnings ($0.86 versus $0.42).
  • The gross profit margin for LAMAR ADVERTISING CO is rather high; currently it is at 65.42%. Regardless of LAMR'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 4.66% trails the industry average.
  • 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 Media industry and the overall market on the basis of return on equity, LAMAR ADVERTISING CO underperformed against that of the industry average and is significantly less than that of 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.

Lorillard

Dividend Yield: 4.10%

Lorillard (NYSE: LO) shares currently have a dividend yield of 4.10%.

Lorillard, Inc., through its subsidiaries, manufactures and sells cigarettes in the United States. The company operates through two segments, Cigarettes and Electronic Cigarettes. The company has a P/E ratio of 19.71.

The average volume for Lorillard has been 3,453,200 shares per day over the past 30 days. Lorillard has a market cap of $21.5 billion and is part of the tobacco industry. Shares are up 18.3% 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 Lorillard as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • LO's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 0.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • LORILLARD INC reported flat earnings per share in the most recent quarter. 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, LORILLARD INC increased its bottom line by earning $3.14 versus $2.81 in the prior year. This year, the market expects an improvement in earnings ($3.33 versus $3.14).
  • The gross profit margin for LORILLARD INC is rather high; currently it is at 53.97%. 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 23.13% trails the industry average.
  • Compared to its closing price of one year ago, LO's share price has jumped by 34.49%, exceeding the performance of the broader market during that same time frame. 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.
  • Net operating cash flow has decreased to -$628.00 million or 21.47% when compared to the same quarter last year. Despite a decrease in cash flow of 21.47%, LORILLARD INC is in line with the industry average cash flow growth rate of -31.19%.

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

Apollo Investment

Dividend Yield: 9.70%

Apollo Investment (NASDAQ: AINV) shares currently have a dividend yield of 9.70%.

Apollo Investment Corporation is business development company and operates as a closed-end management investment company. The company invests in middle market companies. It provides direct equity capital, mezzanine and senior secured loans, and subordinated debt and loans. The company has a P/E ratio of 6.07.

The average volume for Apollo Investment has been 1,916,000 shares per day over the past 30 days. Apollo Investment has a market cap of $2.0 billion and is part of the financial services industry. Shares are down 2.5% 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 Apollo Investment as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, compelling growth in net income, expanding profit margins and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • AINV's revenue growth has slightly outpaced the industry average of 2.6%. Since the same quarter one year prior, revenues slightly increased by 4.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 Capital Markets industry and the overall market, APOLLO INVESTMENT CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 243.7% when compared to the same quarter one year prior, rising from $18.80 million to $64.64 million.
  • The gross profit margin for APOLLO INVESTMENT CORP is currently very high, coming in at 70.05%. Regardless of AINV's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AINV's net profit margin of 64.26% significantly outperformed against the industry.
  • APOLLO INVESTMENT CORP 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, APOLLO INVESTMENT CORP increased its bottom line by earning $1.17 versus $0.49 in the prior year. For the next year, the market is expecting a contraction of 22.2% in earnings ($0.91 versus $1.17).

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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