Buy-Rated Dividend Stocks: Top 3 Companies: WES, WMB, CXW
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: 4.10%
(NYSE:
) shares currently have a dividend yield of 4.10%.
Western Gas Partners, LP owns, operates, acquires, and develops midstream energy assets in east, west, and south Texas; the Rocky Mountains; north-central Pennsylvania; and the Mid-Continent. The company has a P/E ratio of 32.50.
The average volume for Western Gas Partners has been 347,500 shares per day over the past 30 days. Western Gas Partners has a market cap of $8.8 billion and is part of the energy industry. Shares are down 4.9% year-to-date as of the close of trading on Thursday.
TheStreet Ratings rates
Western Gas Partners
as a
. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in net income, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 18.7%. Since the same quarter one year prior, revenues rose by 21.1%. 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 debt-to-equity ratio is somewhat low, currently at 0.61, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
- The net income growth from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income increased by 7.0% when compared to the same quarter one year prior, going from $85.39 million to $91.39 million.
- Net operating cash flow has slightly increased to $131.04 million or 3.46% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -12.58%.
- 47.20% is the gross profit margin for WESTERN GAS PARTNERS LP which we consider to be strong. Regardless of WES's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WES's net profit margin of 27.04% significantly outperformed against the industry.
- You can view the full Western Gas Partners Ratings Report.
Dividend Yield: 4.70%
(NYSE:
) shares currently have a dividend yield of 4.70%.
The Williams Companies, Inc. operates as an energy infrastructure company. The company has a P/E ratio of 61.12.
The average volume for Williams Companies has been 9,247,700 shares per day over the past 30 days. Williams Companies has a market cap of $36.6 billion and is part of the energy industry. Shares are up 6.8% year-to-date as of the close of trading on Thursday.
TheStreet Ratings rates
Williams Companies
as a
. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, solid stock price performance and impressive record of earnings per share growth. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.
Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 18.7%. Since the same quarter one year prior, revenues rose by 29.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 1478.6% when compared to the same quarter one year prior, rising from -$14.00 million to $193.00 million.
- 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. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- WILLIAMS COS 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, WILLIAMS COS INC increased its bottom line by earning $2.82 versus $0.64 in the prior year. For the next year, the market is expecting a contraction of 74.1% in earnings ($0.73 versus $2.82).
- You can view the full Williams Companies Ratings Report.
Dividend Yield: 5.40%
(NYSE:
) shares currently have a dividend yield of 5.40%.
Corrections Corporation of America, together with its subsidiaries, owns and operates privatized correctional and detention facilities in the United States. The company has a P/E ratio of 24.07.
The average volume for Corrections Corp of America has been 563,900 shares per day over the past 30 days. Corrections Corp of America has a market cap of $4.7 billion and is part of the real estate industry. Shares are up 10.5% year-to-date as of the close of trading on Thursday.
TheStreet Ratings rates
Corrections Corp of America
as a
. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels 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:
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of 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.
- CORRECTIONS CORP AMER's earnings per share declined by 39.0% 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 year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, CORRECTIONS CORP AMER reported lower earnings of $1.66 versus $2.86 in the prior year. This year, the market expects an improvement in earnings ($1.98 versus $1.66).
- CXW, with its decline in revenue, slightly underperformed the industry average of 3.1%. Since the same quarter one year prior, revenues slightly dropped by 1.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, CORRECTIONS CORP AMER has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full Corrections Corp of America Ratings Report.
Other helpful dividend tools from TheStreet:
- Our dividend calendar.
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