Best Of The Buy-Rated Dividend Stocks: Top 3 Companies: TLLP, PSEC, NHI

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."

Tesoro Logistics

Dividend Yield: 4.50%

Tesoro Logistics (NYSE: TLLP) shares currently have a dividend yield of 4.50%.

Tesoro Logistics LP owns, operates, develops, and acquires logistics assets related to crude oil and refined products in the United States. It operates in two segments, Crude Oil Gathering, and Terminalling and Transportation. The company has a P/E ratio of 30.78.

The average volume for Tesoro Logistics has been 549,600 shares per day over the past 30 days. Tesoro Logistics has a market cap of $3.1 billion and is part of the energy industry. Shares are up 7.6% 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 Tesoro Logistics as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, expanding profit margins, good cash flow from operations and compelling growth in net income. 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:
  • TLLP's very impressive revenue growth greatly exceeded the industry average of 1.9%. Since the same quarter one year prior, revenues leaped by 116.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, TESORO LOGISTICS LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • The gross profit margin for TESORO LOGISTICS LP is rather high; currently it is at 60.83%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 25.14% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $18.54 million or 19.30% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -6.46%.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 142.2% when compared to the same quarter one year prior, rising from $13.53 million to $32.77 million.

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

Prospect Capital Corporation

Dividend Yield: 13.80%

Prospect Capital Corporation (NASDAQ: PSEC) shares currently have a dividend yield of 13.80%.

Prospect Capital Corporation is a business development company. The company has a P/E ratio of 9.08.

The average volume for Prospect Capital Corporation has been 4,092,900 shares per day over the past 30 days. Prospect Capital Corporation has a market cap of $3.3 billion and is part of the financial services industry. Shares are down 14.6% 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 Prospect Capital Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, 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 sub par growth in net income.

Highlights from the ratings report include:
  • PSEC's revenue growth has slightly outpaced the industry average of 5.1%. Since the same quarter one year prior, revenues slightly increased by 9.3%. 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 gross profit margin for PROSPECT CAPITAL CORP is rather high; currently it is at 68.68%. Regardless of PSEC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PSEC's net profit margin of 39.36% significantly outperformed against the industry.
  • Net operating cash flow has increased to -$177.43 million or 33.76% when compared to the same quarter last year. Despite an increase in cash flow of 33.76%, PROSPECT CAPITAL CORP is still growing at a significantly lower rate than the industry average of 247.72%.
  • 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 Capital Markets industry and the overall market on the basis of return on equity, PROSPECT CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • PROSPECT CAPITAL CORP's earnings per share declined by 38.2% in the most recent quarter compared to the same quarter a year ago. 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, PROSPECT CAPITAL CORP increased its bottom line by earning $1.08 versus $1.07 in the prior year. This year, the market expects an improvement in earnings ($1.18 versus $1.08).

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

National Health Investors

Dividend Yield: 4.70%

National Health Investors (NYSE: NHI) shares currently have a dividend yield of 4.70%.

National Health Investors Inc. is a real estate investment trust. It invests in the real estate markets of United States. The firm invests in the health care properties primarily in the long-term care and senior housing industries. The company has a P/E ratio of 21.01.

The average volume for National Health Investors has been 136,200 shares per day over the past 30 days. National Health Investors has a market cap of $2.2 billion and is part of the real estate industry. Shares are up 17.5% 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 National Health Investors as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • NHI's very impressive revenue growth greatly exceeded the industry average of 9.1%. Since the same quarter one year prior, revenues leaped by 62.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • NATIONAL HEALTH INVESTORS has improved earnings per share by 15.2% 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, NATIONAL HEALTH INVESTORS increased its bottom line by earning $2.71 versus $2.61 in the prior year. This year, the market expects an improvement in earnings ($3.06 versus $2.71).
  • 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 27.0% when compared to the same quarter one year prior, rising from $19.92 million to $25.30 million.
  • Net operating cash flow has increased to $32.74 million or 35.98% when compared to the same quarter last year. In addition, NATIONAL HEALTH INVESTORS has also vastly surpassed the industry average cash flow growth rate of -64.23%.
  • The gross profit margin for NATIONAL HEALTH INVESTORS is currently very high, coming in at 73.30%. Regardless of NHI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NHI's net profit margin of 57.21% significantly outperformed against the industry.

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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