3 Buy-Rated Dividend Stocks Taking The Lead: COP, GEO, ARCC

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."

ConocoPhillips

Dividend Yield: 4.10%

ConocoPhillips (NYSE: COP) shares currently have a dividend yield of 4.10%.

ConocoPhillips explores for, develops, and produces crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids worldwide. The company has a P/E ratio of 12.21.

The average volume for ConocoPhillips has been 6,748,300 shares per day over the past 30 days. ConocoPhillips has a market cap of $87.6 billion and is part of the energy industry. Shares are down 0.4% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates ConocoPhillips as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, reasonable valuation levels, expanding profit margins, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry average. The net income increased by 9.0% when compared to the same quarter one year prior, going from $2,480.00 million to $2,704.00 million.
  • 40.09% is the gross profit margin for CONOCOPHILLIPS which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.38% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $4,180.00 million or 12.82% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -2.53%.
  • The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.94 is somewhat weak and could be cause for future problems.

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

GEO Group

Dividend Yield: 6.20%

GEO Group (NYSE: GEO) shares currently have a dividend yield of 6.20%.

The GEO Group, Inc. provides government-outsourced services specializing in the management of correctional, detention, and re-entry facilities, and the provision of community based services and youth services in the United States, Australia, South Africa, the United Kingdom, and Canada. The company has a P/E ratio of 21.50.

The average volume for GEO Group has been 519,400 shares per day over the past 30 days. GEO Group has a market cap of $3.0 billion and is part of the real estate industry. Shares are up 23.2% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates GEO Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, solid stock price performance, increase in net income and growth in earnings per share. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • GEO's revenue growth has slightly outpaced the industry average of 13.7%. Since the same quarter one year prior, revenues rose by 20.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 30.4% when compared to the same quarter one year prior, rising from $29.90 million to $38.99 million.
  • GEO GROUP INC has improved earnings per share by 20.0% 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, GEO GROUP INC reported lower earnings of $1.64 versus $2.37 in the prior year. This year, the market expects an improvement in earnings ($1.96 versus $1.64).

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

Ares Capital Corporation

Dividend Yield: 9.30%

Ares Capital Corporation (NASDAQ: ARCC) shares currently have a dividend yield of 9.30%.

Ares Capital Corporation is a business development company specializing in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle market companies. It also makes growth capital and general refinancing. The company has a P/E ratio of 8.54.

The average volume for Ares Capital Corporation has been 2,138,200 shares per day over the past 30 days. Ares Capital Corporation has a market cap of $5.2 billion and is part of the financial services industry. Shares are down 7.7% year-to-date as of the close of trading on Thursday.

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 Ares Capital Corporation 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 increase in net income. 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:
  • ARCC's revenue growth has slightly outpaced the industry average of 1.0%. Since the same quarter one year prior, revenues slightly increased by 9.1%. 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 significantly increased by 83.09% to -$104.02 million when compared to the same quarter last year. In addition, ARES CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -227.20%.
  • The gross profit margin for ARES CAPITAL CORP is rather high; currently it is at 65.83%. Regardless of ARCC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ARCC's net profit margin of 63.50% significantly outperformed against the industry.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Capital Markets industry average, but is greater than that of the S&P 500. The net income increased by 7.0% when compared to the same quarter one year prior, going from $133.50 million to $142.83 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, ARES CAPITAL CORP 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.

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