Buy-Rated Dividend Stocks: Top 3 Companies: HCN, SBRA, EEP

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."

Health Care REIT

Dividend Yield: 4.40%

Health Care REIT (NYSE: HCN) shares currently have a dividend yield of 4.40%.

Health Care REIT, Inc. is an independent equity real estate investment trust. The firm engages in acquiring, planning, developing, managing, repositioning and monetizing of real estate assets. It primarily invests in the real estate markets of the United States. The company has a P/E ratio of 80.80.

The average volume for Health Care REIT has been 2,375,500 shares per day over the past 30 days. Health Care REIT has a market cap of $23.8 billion and is part of the real estate industry. Shares are up 34.9% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Health Care REIT as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income, revenue growth, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. 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 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 309.2% when compared to the same quarter one year prior, rising from $37.29 million to $152.61 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 13.8%. Since the same quarter one year prior, revenues slightly increased by 7.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has increased to $258.64 million or 18.00% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 6.70%.

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Sabra Health Care REIT

Dividend Yield: 5.60%

Sabra Health Care REIT (NASDAQ: SBRA) shares currently have a dividend yield of 5.60%.

Sabra Health Care REIT, Inc. operates as a real estate investment trust in the United States. The company, through its subsidiaries, owns and invests in real estate properties for the healthcare industry. The company has a P/E ratio of 42.33.

The average volume for Sabra Health Care REIT has been 694,400 shares per day over the past 30 days. Sabra Health Care REIT has a market cap of $1.5 billion and is part of the real estate industry. Shares are up 7.1% year-to-date as of the close of trading on Monday.

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 Sabra Health Care REIT 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:
  • The revenue growth came in higher than the industry average of 13.8%. Since the same quarter one year prior, revenues rose by 33.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • SABRA HEALTH CARE REIT INC has improved earnings per share by 29.2% 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, SABRA HEALTH CARE REIT INC increased its bottom line by earning $0.67 versus $0.53 in the prior year. This year, the market expects an improvement in earnings ($0.79 versus $0.67).
  • 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 45.5% when compared to the same quarter one year prior, rising from $11.82 million to $17.20 million.
  • Net operating cash flow has significantly increased by 61.36% to $42.32 million when compared to the same quarter last year. In addition, SABRA HEALTH CARE REIT INC has also vastly surpassed the industry average cash flow growth rate of 6.70%.
  • The gross profit margin for SABRA HEALTH CARE REIT INC is rather high; currently it is at 63.65%. Regardless of SBRA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SBRA's net profit margin of 39.11% 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.

Enbridge Energy Partners

Dividend Yield: 5.60%

Enbridge Energy Partners (NYSE: EEP) shares currently have a dividend yield of 5.60%.

Enbridge Energy Partners, L.P. owns and operates crude oil and liquid petroleum transportation and storage assets; and natural gas gathering, treating, processing, transportation, and marketing assets in the United States. It operates through three segments: Liquids, Natural Gas, and Marketing.

The average volume for Enbridge Energy Partners has been 1,006,500 shares per day over the past 30 days. Enbridge Energy Partners has a market cap of $10.1 billion and is part of the energy industry. Shares are up 32.1% year-to-date as of the close of trading on Monday.

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 Enbridge Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, solid stock price performance, impressive record of earnings per share growth and notable return on equity. 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:
  • The revenue growth came in higher than the industry average of 6.5%. Since the same quarter one year prior, revenues slightly increased by 8.5%. 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 exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry average. The net income increased by 14.1% when compared to the same quarter one year prior, going from $41.00 million to $46.80 million.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 34.66% over the past year, a rise that has exceeded that of the S&P 500 Index. 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.
  • ENBRIDGE ENERGY PRTNRS -LP 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, ENBRIDGE ENERGY PRTNRS -LP swung to a loss, reporting -$0.38 versus $1.25 in the prior year. This year, the market expects an improvement in earnings ($0.97 versus -$0.38).
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, ENBRIDGE ENERGY PRTNRS -LP's return on equity significantly trails that of both the industry average and 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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