What To Buy: Top 3 Buy-Rated Dividend Stocks: SPH, SFL, PFLT

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."

Suburban Propane Partners

Dividend Yield: 8.00%

Suburban Propane Partners (NYSE: SPH) shares currently have a dividend yield of 8.00%.

Suburban Propane Partners, L.P., through its subsidiaries, engages in the retail marketing and distribution of propane, fuel oil, and refined fuels. The company has a P/E ratio of 29.57.

The average volume for Suburban Propane Partners has been 125,000 shares per day over the past 30 days. Suburban Propane Partners has a market cap of $2.7 billion and is part of the utilities industry. Shares are up 0.2% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Suburban Propane Partners as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, notable return on equity and increase in stock price during the past year. 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:
  • Net operating cash flow has significantly increased by 707.61% to $33.61 million when compared to the same quarter last year. In addition, SUBURBAN PROPANE PRTNRS -LP has also vastly surpassed the industry average cash flow growth rate of 11.33%.
  • SUBURBAN PROPANE PRTNRS -LP's earnings per share declined by 5.2% 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, SUBURBAN PROPANE PRTNRS -LP increased its bottom line by earning $1.55 versus $1.44 in the prior year. This year, the market expects an improvement in earnings ($2.17 versus $1.55).
  • SPH, with its decline in revenue, slightly underperformed the industry average of 10.5%. Since the same quarter one year prior, revenues fell by 19.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Gas Utilities industry average. The net income has decreased by 4.9% when compared to the same quarter one year ago, dropping from $58.67 million to $55.81 million.
  • In its most recent trading session, SPH has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.

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Ship Finance International

Dividend Yield: 10.70%

Ship Finance International (NYSE: SFL) shares currently have a dividend yield of 10.70%.

Ship Finance International Limited owns and operates vessels and offshore related assets in Bermuda, Cyprus, Malta, Liberia, Norway, Singapore, the United Kingdom, and the Marshall Islands. It is also involved in the charter, purchase, and sale of assets. The company has a P/E ratio of 15.92.

The average volume for Ship Finance International has been 555,200 shares per day over the past 30 days. Ship Finance International has a market cap of $1.5 billion and is part of the transportation industry. Shares are up 11.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Ship Finance International 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. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 33.1%. Since the same quarter one year prior, revenues rose by 23.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • SHIP FINANCE INTL LTD has improved earnings per share by 35.0% 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, SHIP FINANCE INTL LTD increased its bottom line by earning $1.25 versus $1.01 in the prior year. This year, the market expects an improvement in earnings ($1.35 versus $1.25).
  • 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 37.3% when compared to the same quarter one year prior, rising from $18.30 million to $25.14 million.
  • The gross profit margin for SHIP FINANCE INTL LTD is rather high; currently it is at 64.86%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 28.35% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 51.56% to $36.60 million when compared to the same quarter last year. In addition, SHIP FINANCE INTL LTD has also vastly surpassed the industry average cash flow growth rate of -42.26%.

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PennantPark Floating Rate Capital

Dividend Yield: 8.00%

PennantPark Floating Rate Capital (NASDAQ: PFLT) shares currently have a dividend yield of 8.00%.

PennantPark Floating Rate Capital Ltd. is a business development company. It seeks to make secondary direct, debt, equity, and loan investments. The fund seeks to invest through floating rate loans in private or thinly traded or small market-cap, public middle market companies. The company has a P/E ratio of 10.38.

The average volume for PennantPark Floating Rate Capital has been 54,300 shares per day over the past 30 days. PennantPark Floating Rate Capital has a market cap of $213.5 million and is part of the financial services industry. Shares are up 4.2% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates PennantPark Floating Rate Capital 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 and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • PFLT's revenue growth has slightly outpaced the industry average of 4.4%. Since the same quarter one year prior, revenues slightly increased by 9.2%. 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 gross profit margin for PENNANTPARK FLOATING RT CAP is currently very high, coming in at 84.98%. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, PFLT's net profit margin of 5.85% significantly trails the industry average.
  • Net operating cash flow has significantly increased by 134.92% to $12.19 million when compared to the same quarter last year. Despite an increase in cash flow, PENNANTPARK FLOATING RT CAP's average is still marginally south of the industry average growth rate of 141.93%.
  • In its most recent trading session, PFLT has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
  • PENNANTPARK FLOATING RT CAP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PENNANTPARK FLOATING RT CAP increased its bottom line by earning $1.38 versus $1.30 in the prior year. For the next year, the market is expecting a contraction of 10.1% in earnings ($1.24 versus $1.38).

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