Best Of The Buy-Rated Dividend Stocks: Top 3 Companies: PACW, BX, BPT

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."

PacWest Bancorp

Dividend Yield: 4.40%

PacWest Bancorp (NASDAQ: PACW) shares currently have a dividend yield of 4.40%.

PacWest Bancorp operates as the holding company for Pacific Western Bank that provides commercial banking products and services to individuals, professionals, and small to mid-sized businesses in the United States. It accepts demand, money market, and time deposits. The company has a P/E ratio of 36.50.

The average volume for PacWest Bancorp has been 586,900 shares per day over the past 30 days. PacWest Bancorp has a market cap of $4.6 billion and is part of the banking industry. Shares are up 7.7% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates PacWest Bancorp as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, good cash flow from operations, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • PACW's very impressive revenue growth greatly exceeded the industry average of 1.7%. Since the same quarter one year prior, revenues leaped by 142.2%. 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 Commercial Banks industry. The net income increased by 157.7% when compared to the same quarter one year prior, rising from $24.16 million to $62.27 million.
  • Net operating cash flow has significantly increased by 295.77% to $96.65 million when compared to the same quarter last year. In addition, PACWEST BANCORP has also vastly surpassed the industry average cash flow growth rate of -60.71%.
  • 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. 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.
  • PACWEST BANCORP has improved earnings per share by 13.2% 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, PACWEST BANCORP reported lower earnings of $1.08 versus $1.53 in the prior year. This year, the market expects an improvement in earnings ($1.95 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.

Blackstone Group

Dividend Yield: 5.50%

Blackstone Group (NYSE: BX) shares currently have a dividend yield of 5.50%.

The Blackstone Group L.P. is a publicly owned investment manager. The firm also provides financial advisory services to its clients. It provides its services to public and corporate pension funds, academic, cultural, and charitable organizations. The company has a P/E ratio of 11.69.

The average volume for Blackstone Group has been 4,823,800 shares per day over the past 30 days. Blackstone Group has a market cap of $18.9 billion and is part of the financial services industry. Shares are up 3.5% year-to-date as of the close of trading on Tuesday.

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

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 1.2%. Since the same quarter one year prior, revenues rose by 42.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
  • BLACKSTONE GROUP LP has improved earnings per share by 41.4% 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, BLACKSTONE GROUP LP increased its bottom line by earning $1.98 versus $0.40 in the prior year. This year, the market expects an improvement in earnings ($3.12 versus $1.98).
  • 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 Capital Markets industry average. The net income increased by 46.4% when compared to the same quarter one year prior, rising from $171.16 million to $250.51 million.
  • The gross profit margin for BLACKSTONE GROUP LP is currently lower than what is desirable, coming in at 33.15%. Regardless of BX's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 16.36% trails the industry average.

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

BP Prudhoe Bay Royalty

Dividend Yield: 9.90%

BP Prudhoe Bay Royalty (NYSE: BPT) shares currently have a dividend yield of 9.90%.

BP Prudhoe Bay Royalty Trust operates as a grantor trust in the United States. The company holds overriding royalty interest comprising a non-operational interest in minerals in the Prudhoe Bay field located on the North Slope of Alaska. The company has a P/E ratio of 30.96.

The average volume for BP Prudhoe Bay Royalty has been 120,300 shares per day over the past 30 days. BP Prudhoe Bay Royalty has a market cap of $1.8 billion and is part of the energy industry. Shares are up 1.5% year-to-date as of the close of trading on Tuesday.

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 BP Prudhoe Bay Royalty as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, compelling growth in net income, expanding profit margins and impressive record of earnings per share growth. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 6.4%. Since the same quarter one year prior, revenues rose by 40.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • BPT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.78, which clearly demonstrates the ability to cover short-term cash needs.
  • 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 41.5% when compared to the same quarter one year prior, rising from $45.86 million to $64.90 million.
  • The gross profit margin for BP PRUDHOE BAY ROYALTY TRUST is currently very high, coming in at 100.00%. BPT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, BPT's net profit margin of 99.55% significantly outperformed against the industry.
  • BP PRUDHOE BAY ROYALTY TRUST has improved earnings per share by 41.6% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, BP PRUDHOE BAY ROYALTY TRUST reported lower earnings of $9.04 versus $9.29 in the prior year.

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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