3 Buy-Rated Dividend Stocks: BGS, PACW, PBCT

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."

B&G Foods

Dividend Yield: 4.60%

B&G Foods (NYSE: BGS) shares currently have a dividend yield of 4.60%.

B&G Foods, Inc. manufactures, sells, and distributes shelf-stable food and household products in the United States, Canada, and Puerto Rico. The company has a P/E ratio of 39.16.

The average volume for B&G Foods has been 455,000 shares per day over the past 30 days. B&G Foods has a market cap of $1.6 billion and is part of the food & beverage industry. Shares are down 0.5% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates B&G Foods as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and growth in earnings per share. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.3%. Since the same quarter one year prior, revenues slightly increased by 9.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Food Products industry average. The net income increased by 10.1% when compared to the same quarter one year prior, going from $17.78 million to $19.57 million.
  • B&G FOODS INC has improved earnings per share by 9.1% 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, B&G FOODS INC reported lower earnings of $0.76 versus $0.98 in the prior year. This year, the market expects an improvement in earnings ($1.52 versus $0.76).
  • BGS has underperformed the S&P 500 Index, declining 6.95% from its price level of one year ago. Despite the decline in its share price over the last year, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry. We feel, however, that other strengths this company displays compensate for this.
  • The debt-to-equity ratio is very high at 3.04 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, BGS maintains a poor quick ratio of 0.93, which illustrates the inability to avoid short-term cash problems.

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PacWest Bancorp

Dividend Yield: 4.30%

PacWest Bancorp (NASDAQ: PACW) shares currently have a dividend yield of 4.30%.

PacWest Bancorp operates as the holding company for Pacific Western Bank that provides commercial banking products and services to individuals, professionals, and small to mid-sized businesses in the United States. It accepts demand, money market, and time deposits. The company has a P/E ratio of 22.25.

The average volume for PacWest Bancorp has been 726,100 shares per day over the past 30 days. PacWest Bancorp has a market cap of $4.8 billion and is part of the banking industry. Shares are up 1.8% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates PacWest Bancorp 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, solid stock price performance and expanding profit margins. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • PACW's very impressive revenue growth greatly exceeded the industry average of 0.1%. Since the same quarter one year prior, revenues leaped by 157.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • PACWEST BANCORP has improved earnings per share by 24.6% 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, PACWEST BANCORP increased its bottom line by earning $1.97 versus $1.08 in the prior year. This year, the market expects an improvement in earnings ($2.80 versus $1.97).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Banks industry. The net income increased by 191.4% when compared to the same quarter one year prior, rising from $25.08 million to $73.08 million.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
  • The gross profit margin for PACWEST BANCORP is currently very high, coming in at 86.53%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, PACW's net profit margin of 31.07% compares favorably to the industry average.

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People's United Financial

Dividend Yield: 4.40%

People's United Financial (NASDAQ: PBCT) shares currently have a dividend yield of 4.40%.

People's United Financial, Inc. operates as the bank holding company for People's United Bank that provides commercial banking, retail banking, and wealth management services to individual, corporate, and municipal customers. The company has a P/E ratio of 17.83.

The average volume for People's United Financial has been 2,835,400 shares per day over the past 30 days. People's United Financial has a market cap of $4.7 billion and is part of the banking industry. Shares are up 1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates People's United Financial as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, growth in earnings per share, expanding profit margins and increase in stock price during the past year. 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:
  • PBCT's revenue growth has slightly outpaced the industry average of 0.1%. Since the same quarter one year prior, revenues slightly increased by 4.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Commercial Banks industry average. The net income increased by 11.5% when compared to the same quarter one year prior, going from $53.10 million to $59.20 million.
  • PEOPLE'S UNITED FINL INC has improved earnings per share by 11.1% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, PEOPLE'S UNITED FINL INC increased its bottom line by earning $0.85 versus $0.74 in the prior year. This year, the market expects earnings to be in line with last year ($0.85 versus $0.85).
  • The gross profit margin for PEOPLE'S UNITED FINL INC is currently very high, coming in at 87.98%. Regardless of PBCT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PBCT's net profit margin of 16.94% is significantly lower than the industry average.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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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