3 Buy-Rated Dividend Stocks To Check Out: RDS.A, NHI, 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

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."

Royal Dutch Shell

Dividend Yield: 5.90%

Royal Dutch Shell (NYSE: RDS.A) shares currently have a dividend yield of 5.90%.

Royal Dutch Shell plc operates as an independent oil and gas company worldwide. It operates through Upstream and Downstream segments. The company explores for and extracts crude oil, natural gas, and natural gas liquids. The company has a P/E ratio of 8.04.

The average volume for Royal Dutch Shell has been 3,919,200 shares per day over the past 30 days. Royal Dutch Shell has a market cap of $201.3 billion and is part of the energy industry. Shares are down 5.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Royal Dutch Shell as a buy. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • RDS.A's debt-to-equity ratio is very low at 0.26 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.90 is somewhat weak and could be cause for future problems.
  • ROYAL DUTCH SHELL PLC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ROYAL DUTCH SHELL PLC reported lower earnings of $4.70 versus $5.18 in the prior year. This year, the market expects an improvement in earnings ($7.06 versus $4.70).
  • RDS.A, with its decline in revenue, slightly underperformed the industry average of 33.1%. Since the same quarter one year prior, revenues fell by 40.1%. 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 Oil, Gas & Consumable Fuels industry average. The net income has decreased by 1.8% when compared to the same quarter one year ago, dropping from $4,509.00 million to $4,430.00 million.

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National Health Investors

Dividend Yield: 5.10%

National Health Investors (NYSE: NHI) shares currently have a dividend yield of 5.10%.

National Health Investors Inc. is a real estate investment trust. It invests in the real estate markets of United States. The firm invests in the health care properties primarily in the long-term care and senior housing industries. The company has a P/E ratio of 22.10.

The average volume for National Health Investors has been 173,100 shares per day over the past 30 days. National Health Investors has a market cap of $2.5 billion and is part of the real estate industry. Shares are down 4% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates National Health Investors as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations, expanding profit margins 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:
  • The revenue growth came in higher than the industry average of 9.8%. Since the same quarter one year prior, revenues rose by 38.5%. 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.
  • Net operating cash flow has increased to $32.93 million or 10.57% when compared to the same quarter last year. In addition, NATIONAL HEALTH INVESTORS has also vastly surpassed the industry average cash flow growth rate of -62.88%.
  • NATIONAL HEALTH INVESTORS' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, NATIONAL HEALTH INVESTORS increased its bottom line by earning $3.03 versus $2.76 in the prior year. This year, the market expects an improvement in earnings ($3.53 versus $3.03).
  • The gross profit margin for NATIONAL HEALTH INVESTORS is currently very high, coming in at 74.17%. Regardless of NHI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NHI's net profit margin of 60.49% significantly outperformed against the industry.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.

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Enbridge Energy Partners

Dividend Yield: 6.10%

Enbridge Energy Partners (NYSE: EEP) shares currently have a dividend yield of 6.10%.

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 two segments, Liquids and Natural Gas. The company has a P/E ratio of 50.19.

The average volume for Enbridge Energy Partners has been 776,000 shares per day over the past 30 days. Enbridge Energy Partners has a market cap of $9.6 billion and is part of the energy industry. Shares are down 5.7% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Enbridge Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, expanding profit margins, good cash flow from operations and solid stock price performance. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:
  • ENBRIDGE ENERGY PRTNRS -LP has improved earnings per share by 44.4% 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 year. We feel that this trend should continue. During the past fiscal year, ENBRIDGE ENERGY PRTNRS -LP turned its bottom line around by earning $0.67 versus -$0.38 in the prior year. This year, the market expects an improvement in earnings ($1.02 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 Oil, Gas & Consumable Fuels industry. The net income increased by 39.4% when compared to the same quarter one year prior, rising from $119.40 million to $166.50 million.
  • 41.01% is the gross profit margin for ENBRIDGE ENERGY PRTNRS -LP which we consider to be strong. It has increased significantly from the same period last year. Along with this, the net profit margin of 11.65% is above that of the industry average.
  • Net operating cash flow has significantly increased by 80.50% to $380.50 million when compared to the same quarter last year. In addition, ENBRIDGE ENERGY PRTNRS -LP has also vastly surpassed the industry average cash flow growth rate of -42.26%.
  • 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, 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.

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