Best Of The Buy-Rated Dividend Stocks: Top 3 Companies: ETR, MAA, ARCC
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."
Dividend Yield: 4.30%
(NYSE:
) shares currently have a dividend yield of 4.30%.
Entergy Corporation, together with its subsidiaries, engages in the electric power production and retail electric distribution operations in the United States. It operates in two segments, Utility and Entergy Wholesale Commodities. The company has a P/E ratio of 14.75.
The average volume for Entergy has been 1,622,400 shares per day over the past 30 days. Entergy has a market cap of $13.8 billion and is part of the utilities industry. Shares are down 14.6% year-to-date as of the close of trading on Friday.
TheStreet Ratings rates
Entergy
as a
. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations and solid stock price performance. We feel these 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 12.0%. Since the same quarter one year prior, revenues slightly increased by 5.2%. 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.
- 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, despite 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.
- ENTERGY CORP's earnings per share declined by 19.5% 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, ENTERGY CORP increased its bottom line by earning $5.22 versus $3.98 in the prior year. This year, the market expects an improvement in earnings ($5.41 versus $5.22).
- 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 Electric Utilities industry and the overall market on the basis of return on equity, ENTERGY CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Net operating cash flow has remained constant at $998.07 million with no significant change when compared to the same quarter last year. In addition, ENTERGY CORP has modestly surpassed the industry average cash flow growth rate of -8.17%.
- You can view the full Entergy Ratings Report.
Mid-America Apartment Communities
Dividend Yield: 4.20%
Mid-America Apartment Communities
(NYSE:
) shares currently have a dividend yield of 4.20%.
Mid-America Apartment Communities, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in acquisition, redevelopment, new development, property management, and disposition of multifamily apartment communities. The company has a P/E ratio of 39.11.
The average volume for Mid-America Apartment Communities has been 495,600 shares per day over the past 30 days. Mid-America Apartment Communities has a market cap of $5.5 billion and is part of the real estate industry. Shares are down 4.7% year-to-date as of the close of trading on Friday.
TheStreet Ratings rates
Mid-America Apartment Communities
as a
. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, compelling growth in net income, revenue growth, reasonable valuation levels and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
Highlights from the ratings report include:
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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 472.3% when compared to the same quarter one year prior, rising from -$9.27 million to $34.52 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.9%. Since the same quarter one year prior, revenues slightly increased by 5.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MID-AMERICA APT CMNTYS INC 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, MID-AMERICA APT CMNTYS INC increased its bottom line by earning $1.88 versus $0.99 in the prior year. For the next year, the market is expecting a contraction of 3.2% in earnings ($1.82 versus $1.88).
- You can view the full Mid-America Apartment Communities Ratings Report.
Dividend Yield: 8.60%
(NASDAQ:
) shares currently have a dividend yield of 8.60%.
Ares Capital Corporation is a business development company specializing in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle market companies. It also makes growth capital and general refinancing. The company has a P/E ratio of 9.16.
The average volume for Ares Capital Corporation has been 2,467,500 shares per day over the past 30 days. Ares Capital Corporation has a market cap of $5.5 billion and is part of the financial services industry. Shares are up 12.8% year-to-date as of the close of trading on Friday.
TheStreet Ratings rates
Ares Capital Corporation
as a
. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, expanding profit margins and growth in earnings per share. We feel these 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 13.1%. Since the same quarter one year prior, revenues rose by 15.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Capital Markets industry average. The net income increased by 14.6% when compared to the same quarter one year prior, going from $133.88 million to $153.39 million.
- Net operating cash flow has significantly increased by 83.93% to -$30.82 million when compared to the same quarter last year. In addition, ARES CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of 6.53%.
- The gross profit margin for ARES CAPITAL CORP is rather high; currently it is at 69.02%. Regardless of ARCC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ARCC's net profit margin of 56.61% significantly outperformed against the industry.
- ARES CAPITAL 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 year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ARES CAPITAL CORP increased its bottom line by earning $1.93 versus $1.81 in the prior year. For the next year, the market is expecting a contraction of 16.1% in earnings ($1.62 versus $1.93).
- You can view the full Ares Capital Corporation Ratings Report.
Other helpful dividend tools from TheStreet:
- Our dividend calendar.
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