What To Buy: Top 3 Buy-Rated Dividend Stocks: LAMR, MO, MWE

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

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."

Lamar Advertising

Dividend Yield: 4.60%

Lamar Advertising (NASDAQ: LAMR) shares currently have a dividend yield of 4.60%.

Lamar Advertising Company is a publicly owned equity real estate investment trust. The firm primarily engages in selling advertising space on billboards, buses, shelters, benches, and logo plates. Lamar Advertising Company was founded in 1902 and is headquartered in Baton Rouge, Louisiana. The company has a P/E ratio of 22.12.

The average volume for Lamar Advertising has been 733,600 shares per day over the past 30 days. Lamar Advertising has a market cap of $4.8 billion and is part of the real estate industry. Shares are up 9.7% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Lamar Advertising as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, notable return on equity, solid stock price performance and good cash flow from operations. 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 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 1940.9% when compared to the same quarter one year prior, rising from $10.19 million to $207.88 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.4%. Since the same quarter one year prior, revenues slightly increased by 5.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, LAMAR ADVERTISING CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 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.
  • Net operating cash flow has increased to $149.33 million or 49.29% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 11.50%.

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Altria Group

Dividend Yield: 4.10%

Altria Group (NYSE: MO) shares currently have a dividend yield of 4.10%.

Altria Group, Inc., through its subsidiaries, manufactures and sells cigarettes, smokeless products, and wine in the United States and internationally. The company has a P/E ratio of 20.16.

The average volume for Altria Group has been 7,402,000 shares per day over the past 30 days. Altria Group has a market cap of $98.7 billion and is part of the tobacco industry. Shares are up 1.9% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Altria Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins, good cash flow from operations and solid stock price performance. 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 23.1%. Since the same quarter one year prior, revenues slightly increased by 6.6%. 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 company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Tobacco industry and the overall market, ALTRIA GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for ALTRIA GROUP INC is rather high; currently it is at 58.97%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 23.82% is above that of the industry average.
  • Net operating cash flow has increased to $2,498.00 million or 17.55% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -29.58%.
  • Compared to its closing price of one year ago, MO's share price has jumped by 36.64%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.

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MarkWest Energy Partners

Dividend Yield: 5.50%

MarkWest Energy Partners (NYSE: MWE) shares currently have a dividend yield of 5.50%.

MarkWest Energy Partners, L.P. engages in the gathering, processing, and transportation of natural gas. The company is also involved in the gathering, transportation, fractionation, storage, and marketing of natural gas liquids; and the gathering and transportation of crude oil. The company has a P/E ratio of 92.53.

The average volume for MarkWest Energy Partners has been 892,300 shares per day over the past 30 days. MarkWest Energy Partners has a market cap of $12.4 billion and is part of the energy industry. Shares are down 0.8% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates MarkWest Energy Partners 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, expanding profit margins and good cash flow from operations. 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 20.3%. Since the same quarter one year prior, revenues rose by 18.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • MARKWEST ENERGY PARTNERS LP reported significant earnings per share improvement 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 year. We feel that this trend should continue. During the past fiscal year, MARKWEST ENERGY PARTNERS LP increased its bottom line by earning $0.71 versus $0.21 in the prior year. This year, the market expects an improvement in earnings ($0.83 versus $0.71).
  • 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 633.2% when compared to the same quarter one year prior, rising from -$6.56 million to $34.98 million.
  • The gross profit margin for MARKWEST ENERGY PARTNERS LP is rather high; currently it is at 62.44%. It has increased significantly from the same period last year. Along with this, the net profit margin of 6.49% is above that of the industry average.
  • Net operating cash flow has significantly increased by 64.12% to $172.32 million when compared to the same quarter last year. In addition, MARKWEST ENERGY PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -13.13%.

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