Top 3 Yielding Buy-Rated Stocks: ROIC, HLSS, EPB

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."

Retail Opportunity Investments

Dividend Yield: 4.40%

Retail Opportunity Investments (NASDAQ: ROIC) shares currently have a dividend yield of 4.40%.

Retail Opportunity Investments Corp., a real estate investment trust (REIT), engages in the acquisition, ownership, and management of necessity-based community and neighborhood shopping centers in the eastern and western regions of the United States. The company has a P/E ratio of 27.66.

The average volume for Retail Opportunity Investments has been 548,000 shares per day over the past 30 days. Retail Opportunity Investments has a market cap of $1.3 billion and is part of the real estate industry. Shares are up 0.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Retail Opportunity Investments as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, impressive record of earnings per share growth, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

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 41.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 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 136.1% when compared to the same quarter one year prior, rising from $2.47 million to $5.83 million.
  • RETAIL OPPORTUNITY INVTS CP 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 year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, RETAIL OPPORTUNITY INVTS CP increased its bottom line by earning $0.47 versus $0.15 in the prior year. For the next year, the market is expecting a contraction of 51.1% in earnings ($0.23 versus $0.47).
  • In its most recent trading session, ROIC 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. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, RETAIL OPPORTUNITY INVTS CP underperformed against that of the industry average and is significantly less than that of the S&P 500.

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Home Loan Servicing Solutions

Dividend Yield: 9.90%

Home Loan Servicing Solutions (NASDAQ: HLSS) shares currently have a dividend yield of 9.90%.

Home Loan Servicing Solutions, Ltd., through its subsidiaries, engages in the acquisition of mortgage servicing assets. Its mortgage servicing assets consists of servicing advances, mortgage servicing rights, rights to mortgage servicing rights, and other related assets. The company has a P/E ratio of 9.95.

The average volume for Home Loan Servicing Solutions has been 684,800 shares per day over the past 30 days. Home Loan Servicing Solutions has a market cap of $1.5 billion and is part of the real estate industry. Shares are down 5.6% 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 Home Loan Servicing Solutions as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, expanding profit margins, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 12.8%. Since the same quarter one year prior, revenues rose by 43.2%. 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.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Thrifts & Mortgage Finance industry average. The net income increased by 15.6% when compared to the same quarter one year prior, going from $43.83 million to $50.66 million.
  • The gross profit margin for HOME LOAN SERVICING SOLTNS is currently very high, coming in at 95.30%. Regardless of HLSS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HLSS's net profit margin of 53.24% significantly outperformed against the industry.
  • Net operating cash flow has increased to $268.47 million or 17.67% when compared to the same quarter last year. Despite an increase in cash flow of 17.67%, HOME LOAN SERVICING SOLTNS is still growing at a significantly lower rate than the industry average of 119.96%.
  • 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 Thrifts & Mortgage Finance industry and the overall market on the basis of return on equity, HOME LOAN SERVICING SOLTNS has outperformed in comparison with the industry average, but has underperformed when compared to 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.

El Paso Pipeline Partners

Dividend Yield: 6.60%

El Paso Pipeline Partners (NYSE: EPB) shares currently have a dividend yield of 6.60%.

El Paso Pipeline Partners, L.P. owns and operates interstate natural gas transportation and terminaling facilities in the United States. The company has a P/E ratio of 22.77.

The average volume for El Paso Pipeline Partners has been 1,811,500 shares per day over the past 30 days. El Paso Pipeline Partners has a market cap of $9.2 billion and is part of the energy industry. Shares are up 11.7% 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 El Paso Pipeline Partners as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:
  • Net operating cash flow has slightly increased to $171.00 million or 4.26% when compared to the same quarter last year. In addition, EL PASO PIPELINE PARTNERS LP has also modestly surpassed the industry average cash flow growth rate of -5.18%.
  • The gross profit margin for EL PASO PIPELINE PARTNERS LP is currently very high, coming in at 76.77%. Regardless of EPB's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EPB's net profit margin of 37.11% significantly outperformed against the industry.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.0%. Since the same quarter one year prior, revenues slightly dropped by 1.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • In its most recent trading session, EPB 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. 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.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, EL PASO PIPELINE PARTNERS LP has underperformed in comparison with the industry average, but has exceeded 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.

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