Buy These Top 3 Buy-Rated Dividend Stocks Today: STWD, PAA, ETP

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."

Starwood Property

Dividend Yield: 7.90%

Starwood Property (NYSE: STWD) shares currently have a dividend yield of 7.90%.

Starwood Property Trust, Inc. originates, acquires, finances, and manages commercial mortgage loans, other commercial real estate debt investments, commercial mortgage-backed securities, and other commercial real estate-related debt investments in the United States and Europe. The company has a P/E ratio of 11.24.

The average volume for Starwood Property has been 2,321,800 shares per day over the past 30 days. Starwood Property has a market cap of $5.8 billion and is part of the real estate industry. Shares are up 5.2% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Starwood Property as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, expanding profit margins, good cash flow from operations and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.4%. Since the same quarter one year prior, revenues slightly increased by 7.5%. 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.
  • The gross profit margin for STARWOOD PROPERTY TRUST INC is rather high; currently it is at 61.67%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 65.08% significantly outperformed against the industry average.
  • Net operating cash flow has slightly increased to $114.15 million or 9.41% when compared to the same quarter last year. In addition, STARWOOD PROPERTY TRUST INC has also modestly surpassed the industry average cash flow growth rate of -0.03%.
  • 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 on the basis of return on equity, STARWOOD PROPERTY TRUST INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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Plains All American Pipeline

Dividend Yield: 5.70%

Plains All American Pipeline (NYSE: PAA) shares currently have a dividend yield of 5.70%.

Plains All American Pipeline, L.P., through with its subsidiaries, engages in the transportation, storage, terminalling, and marketing of crude oil, natural gas liquids (NGL), natural gas, and refined products in the United States and Canada. The company has a P/E ratio of 24.21.

The average volume for Plains All American Pipeline has been 1,503,000 shares per day over the past 30 days. Plains All American Pipeline has a market cap of $19.2 billion and is part of the energy industry. Shares are down 3.6% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Plains All American Pipeline as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. 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 debt-to-equity ratio is somewhat low, currently at 1.00, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • PAA, with its decline in revenue, underperformed when compared the industry average of 38.3%. Since the same quarter one year prior, revenues fell by 49.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for PLAINS ALL AMER PIPELNE -LP is currently extremely low, coming in at 9.32%. Regardless of PAA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.76% trails the industry average.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, PLAINS ALL AMER PIPELNE -LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

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Energy Transfer Partners

Dividend Yield: 7.10%

Energy Transfer Partners (NYSE: ETP) shares currently have a dividend yield of 7.10%.

Energy Transfer Partners, L.P. engages in the natural gas midstream, and intrastate transportation and storage businesses in the United States. The company has a P/E ratio of 88.34.

The average volume for Energy Transfer Partners has been 2,118,400 shares per day over the past 30 days. Energy Transfer Partners has a market cap of $28.7 billion and is part of the energy industry. Shares are down 11.8% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Energy Transfer Partners as a buy. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. We feel its 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:
  • ENERGY TRANSFER PARTNERS -LP 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ENERGY TRANSFER PARTNERS -LP turned its bottom line around by earning $1.65 versus -$0.24 in the prior year. This year, the market expects an improvement in earnings ($2.22 versus $1.65).
  • Despite the weak revenue results, ETP has outperformed against the industry average of 38.3%. Since the same quarter one year prior, revenues fell by 22.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ENERGY TRANSFER PARTNERS -LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for ENERGY TRANSFER PARTNERS -LP is currently extremely low, coming in at 10.55%. Regardless of ETP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.94% trails the industry average.
  • In its most recent trading session, ETP 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. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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