Best Of The Buy-Rated Dividend Stocks: Top 3 Companies: GOV, OHI, KMP

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."

Government Properties Income

Dividend Yield: 7.50%

Government Properties Income (NYSE: GOV) shares currently have a dividend yield of 7.50%.

Government Properties Income Trust operates as a real estate investment trust (REIT) in the United States. It primarily owns and leases office buildings that are leased mainly to government tenants. The company has a P/E ratio of 25.65.

The average volume for Government Properties Income has been 663,300 shares per day over the past 30 days. Government Properties Income has a market cap of $1.6 billion and is part of the real estate industry. Shares are down 8.8% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Government Properties Income as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • GOV's revenue growth has slightly outpaced the industry average of 13.8%. Since the same quarter one year prior, revenues rose by 22.3%. 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 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 542.0% when compared to the same quarter one year prior, rising from $1.97 million to $12.62 million.
  • Net operating cash flow has increased to $31.16 million or 30.64% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 6.70%.
  • GOVERNMENT PPTYS INCOME TR's earnings per share declined by 18.2% 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, GOVERNMENT PPTYS INCOME TR increased its bottom line by earning $1.02 versus $1.01 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $1.02).

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Omega Healthcare Investors

Dividend Yield: 5.50%

Omega Healthcare Investors (NYSE: OHI) shares currently have a dividend yield of 5.50%.

Omega Healthcare Investors, Inc. is a real estate investment firm. The firm invests in the real estate markets of United States. It invests in healthcare facilities, primarily in long-term healthcare facilities in order to create its portfolio. Omega Healthcare Investors, Inc. The company has a P/E ratio of 22.35.

The average volume for Omega Healthcare Investors has been 1,498,500 shares per day over the past 30 days. Omega Healthcare Investors has a market cap of $4.8 billion and is part of the real estate industry. Shares are up 26.5% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Omega Healthcare Investors 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 solid stock price performance. 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 came in higher than the industry average of 13.8%. Since the same quarter one year prior, revenues rose by 26.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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, OMEGA HEALTHCARE INVS INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for OMEGA HEALTHCARE INVS INC is currently very high, coming in at 70.58%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 47.22% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $92.84 million or 17.93% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 6.70%.
  • 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.

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

Kinder Morgan Energy Partners

Dividend Yield: 5.60%

Kinder Morgan Energy Partners (NYSE: KMP) shares currently have a dividend yield of 5.60%.

Kinder Morgan Energy Partners, L.P. operates as a pipeline transportation and energy storage company in North America. The company operates through five segments: Natural Gas Pipelines, CO2, Products Pipelines, Terminals, and Kinder Morgan Canada. The company has a P/E ratio of 33.62.

The average volume for Kinder Morgan Energy Partners has been 3,294,700 shares per day over the past 30 days. Kinder Morgan Energy Partners has a market cap of $32.6 billion and is part of the energy industry. Shares are up 24% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Kinder Morgan Energy Partners 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, solid stock price performance and increase 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:
  • The revenue growth came in higher than the industry average of 6.5%. Since the same quarter one year prior, revenues rose by 10.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 Oil, Gas & Consumable Fuels industry. The net income increased by 39.8% when compared to the same quarter one year prior, rising from $689.00 million to $963.00 million.
  • 40.56% is the gross profit margin for KINDER MORGAN ENERGY -LP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 25.78% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $1,227.00 million or 28.34% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -1.84%.

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