3 Buy-Rated Dividend Stocks Leading The Pack: NTI, DUK, NHI

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."

Northern Tier Energy

Dividend Yield: 17.60%

Northern Tier Energy (NYSE: NTI) shares currently have a dividend yield of 17.60%.

Northern Tier Energy LP, an independent downstream energy company, engages in refining, retail, and pipeline operations in the United States. It operates through two segments, Refining and Retail. The company has a P/E ratio of 8.09.

The average volume for Northern Tier Energy has been 407,300 shares per day over the past 30 days. Northern Tier Energy has a market cap of $2.3 billion and is part of the energy industry. Shares are up 12.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Northern Tier Energy 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, notable return on equity, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • NORTHERN TIER ENERGY 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 year. We feel that this trend should continue. During the past fiscal year, NORTHERN TIER ENERGY LP increased its bottom line by earning $2.60 versus $2.52 in the prior year. This year, the market expects an improvement in earnings ($3.65 versus $2.60).
  • 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 55.5% when compared to the same quarter one year prior, rising from $71.50 million to $111.20 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NORTHERN TIER ENERGY LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is somewhat low, currently at 0.77, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.95 is somewhat weak and could be cause for future problems.

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Duke Energy Corporation

Dividend Yield: 4.30%

Duke Energy Corporation (NYSE: DUK) shares currently have a dividend yield of 4.30%.

Duke Energy Corporation, together with its subsidiaries, operates as an energy company in the United States and Latin America. It operates through three segments: Regulated Utilities, International Energy, and Commercial Power. The company has a P/E ratio of 21.30.

The average volume for Duke Energy Corporation has been 3,456,200 shares per day over the past 30 days. Duke Energy Corporation has a market cap of $51.5 billion and is part of the utilities industry. Shares are down 12.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Duke Energy Corporation as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, expanding profit margins, growth in earnings per share, good cash flow from operations and reasonable valuation levels. 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:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electric Utilities industry. The net income increased by 990.7% when compared to the same quarter one year prior, rising from -$97.00 million to $864.00 million.
  • 37.16% is the gross profit margin for DUKE ENERGY CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.24% is above that of the industry average.
  • DUKE ENERGY CORP's earnings per share improvement from the most recent quarter was slightly positive. 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, DUKE ENERGY CORP increased its bottom line by earning $4.65 versus $3.63 in the prior year. This year, the market expects an improvement in earnings ($4.66 versus $4.65).
  • Net operating cash flow has slightly increased to $1,440.00 million or 4.87% when compared to the same quarter last year. Despite an increase in cash flow, DUKE ENERGY CORP's cash flow growth rate is still lower than the industry average growth rate of 18.22%.

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National Health Investors

Dividend Yield: 5.20%

National Health Investors (NYSE: NHI) shares currently have a dividend yield of 5.20%.

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 21.09.

The average volume for National Health Investors has been 167,900 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 5.6% year-to-date as of the close of trading on Friday.

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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, increase in stock price during the past year, growth in earnings per share, increase in net income and good cash flow from operations. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 8.4%. Since the same quarter one year prior, revenues rose by 28.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 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. 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.
  • NATIONAL HEALTH INVESTORS has improved earnings per share by 11.3% 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, 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 ($3.34 versus $3.03).
  • 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 Real Estate Investment Trusts (REITs) industry average. The net income increased by 26.1% when compared to the same quarter one year prior, rising from $23.53 million to $29.68 million.
  • Net operating cash flow has increased to $38.56 million or 33.55% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 0.89%.

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