What To Buy: Top 3 Buy-Rated Dividend Stocks: DLR, BP, BX

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."

Digital Realty

Dividend Yield: 5.10%

Digital Realty (NYSE: DLR) shares currently have a dividend yield of 5.10%.

Digital Realty Trust, Inc., a real estate investment trust (REIT), through its controlling interest in Digital Realty Trust, L.P., engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate. The company has a P/E ratio of 44.98.

The average volume for Digital Realty has been 904,700 shares per day over the past 30 days. Digital Realty has a market cap of $9.0 billion and is part of the real estate industry. Shares are up 0.4% year-to-date as of the close of trading on Monday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreet Ratings rates Digital Realty as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, expanding profit margins, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • 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. 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.
  • 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 161.8% when compared to the same quarter one year prior, rising from $45.91 million to $120.18 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.5%. Since the same quarter one year prior, revenues slightly increased by 3.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 37.08% is the gross profit margin for DIGITAL REALTY TRUST INC which we consider to be strong. It has increased significantly from the same period last year. Along with this, the net profit margin of 29.38% is above that of the industry average.
  • Net operating cash flow has increased to $138.92 million or 19.33% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 0.80%.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

BP

Dividend Yield: 5.90%

BP (NYSE: BP) shares currently have a dividend yield of 5.90%.

BP p.l.c. operates as an integrated oil and gas company worldwide. It operates in three segments: Upstream, Downstream, and Rosneft. The company has a P/E ratio of 5.52.

The average volume for BP has been 5,417,900 shares per day over the past 30 days. BP has a market cap of $136.0 billion and is part of the energy industry. Shares are up 7% year-to-date as of the close of trading on Monday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreet Ratings rates BP as a buy. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. 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 current debt-to-equity ratio, 0.52, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.03, which illustrates the ability to avoid short-term cash problems.
  • BP PLC's earnings per share declined by 25.4% in the most recent quarter compared to the same quarter a year ago. 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, BP PLC reported lower earnings of $1.21 versus $7.34 in the prior year. This year, the market expects an improvement in earnings ($2.36 versus $1.21).
  • BP, with its decline in revenue, slightly underperformed the industry average of 38.6%. Since the same quarter one year prior, revenues fell by 40.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for BP PLC is rather low; currently it is at 17.01%. Regardless of BP'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 4.80% trails the industry average.
  • The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 26.2% when compared to the same quarter one year ago, falling from $3,528.00 million to $2,602.00 million.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

Blackstone Group

Dividend Yield: 8.40%

Blackstone Group (NYSE: BX) shares currently have a dividend yield of 8.40%.

The Blackstone Group L.P. is a publicly owned investment manager. The firm also provides financial advisory services to its clients. It provides its services to public and corporate pension funds, academic, cultural, and charitable organizations. The company has a P/E ratio of 13.54.

The average volume for Blackstone Group has been 4,246,500 shares per day over the past 30 days. Blackstone Group has a market cap of $25.9 billion and is part of the financial services industry. Shares are up 25.6% year-to-date as of the close of trading on Monday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreet Ratings rates Blackstone Group as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, expanding profit margins, solid stock price performance and impressive record of earnings per share growth. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • BX's very impressive revenue growth greatly exceeded the industry average of 5.7%. Since the same quarter one year prior, revenues leaped by 63.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market, BLACKSTONE GROUP LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for BLACKSTONE GROUP LP is rather high; currently it is at 56.18%. It has increased significantly from the same period last year. Along with this, the net profit margin of 25.24% is above that of the industry average.
  • 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. 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.
  • BLACKSTONE GROUP 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 two years. We feel that this trend should continue. During the past fiscal year, BLACKSTONE GROUP LP increased its bottom line by earning $2.59 versus $1.98 in the prior year. This year, the market expects an improvement in earnings ($4.07 versus $2.59).

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

Other helpful dividend tools from TheStreet:

More from Markets

Video: There Are Some Big Changes Coming to the PGA Championships in 2019

Video: There Are Some Big Changes Coming to the PGA Championships in 2019

Video: One-on-One With Pluralsight's CEO Following Its Successful IPO

Video: One-on-One With Pluralsight's CEO Following Its Successful IPO

CBS-Viacom Battle Comes to a Head; FDA Approves Novartis Migraine Drug --ICMYI

CBS-Viacom Battle Comes to a Head; FDA Approves Novartis Migraine Drug --ICMYI

Listen: Here's What You Need To Know About ETFs Today (Hint: They're on Fire!)

Listen: Here's What You Need To Know About ETFs Today (Hint: They're on Fire!)

Cramer and His Team Stick to Their Disciplines -- Even When It's Disappointing

Cramer and His Team Stick to Their Disciplines -- Even When It's Disappointing