4 Buy-Rated Dividend Stocks

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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 and 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 4 stocks with substantial yields, that ultimately, we have rated "Buy."

Plains All American Pipeline

Dividend Yield: 4.10%

Plains All American Pipeline (NYSE: PAA) shares currently have a dividend yield of 4.10%.

Plains All American Pipeline, L.P., through its subsidiaries, engages in the transportation, storage, terminalling, and marketing of crude oil and refined products in the United States and Canada. The company operates in three segments: Transportation, Facilities, and Supply and Logistics. The company has a P/E ratio of 23.45.

The average volume for Plains All American Pipeline has been 967,900 shares per day over the past 30 days. Plains All American Pipeline has a market cap of $18.9 billion and is part of the energy industry. Shares are up 24.1% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Plains All American Pipeline as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, solid stock price performance, increase in net income and growth in earnings per share. We feel these 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:
  • PAA's revenue growth has slightly outpaced the industry average of 1.3%. Since the same quarter one year prior, revenues slightly increased by 6.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 39.88% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, PAA should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • 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 Oil, Gas & Consumable Fuels industry average. The net income increased by 15.1% when compared to the same quarter one year prior, going from $278.00 million to $320.00 million.
  • PLAINS ALL AMER PIPELNE -LP reported flat earnings per share in the most recent quarter. 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, PLAINS ALL AMER PIPELNE -LP reported lower earnings of $2.40 versus $2.44 in the prior year. This year, the market expects an improvement in earnings ($2.87 versus $2.40).

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

El Paso Pipeline Partners

Dividend Yield: 5.70%

El Paso Pipeline Partners (NYSE: EPB) shares currently have a dividend yield of 5.70%.

El Paso Pipeline Partners, L.P. engages in the ownership and operation of interstate natural gas transportation and terminaling facilities in the United States. The company has a P/E ratio of 20.00.

The average volume for El Paso Pipeline Partners has been 468,100 shares per day over the past 30 days. El Paso Pipeline Partners has a market cap of $9.3 billion and is part of the energy industry. Shares are up 16.1% year to date as of the close of trading on Thursday.

TheStreet Ratings rates El Paso Pipeline Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins, good cash flow from operations and solid stock price performance. We feel these 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:
  • EPB's revenue growth has slightly outpaced the industry average of 1.3%. Since the same quarter one year prior, revenues slightly increased by 0.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. 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.
  • 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, EL PASO PIPELINE PARTNERS LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • The gross profit margin for EL PASO PIPELINE PARTNERS LP is currently very high, coming in at 74.90%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 45.64% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $193.00 million or 24.51% when compared to the same quarter last year. In addition, EL PASO PIPELINE PARTNERS LP has also modestly surpassed the industry average cash flow growth rate of 20.25%.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

Westar Energy

Dividend Yield: 4.10%

Westar Energy (NYSE: WR) shares currently have a dividend yield of 4.10%.

Westar Energy, Inc., an electric utility, engages in the generation, transmission, and distribution of electricity in Kansas. It produces electricity through various sources, including coal, wind, nuclear, natural gas, diesel, uranium, and landfill gas. The company has a P/E ratio of 15.62.

The average volume for Westar Energy has been 701,600 shares per day over the past 30 days. Westar Energy has a market cap of $4.3 billion and is part of the utilities industry. Shares are up 17.8% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Westar Energy as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, solid stock price performance, good cash flow from operations and notable return on equity. We feel these 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:
  • 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 Electric Utilities industry. The net income increased by 133.0% when compared to the same quarter one year prior, rising from $19.58 million to $45.61 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 13.1%. Since the same quarter one year prior, revenues slightly increased by 7.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has increased to $145.15 million or 16.19% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 5.09%.
  • 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, WESTAR ENERGY INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

Ecopetrol S.A

Dividend Yield: 5.70%

Ecopetrol S.A (NYSE: EC) shares currently have a dividend yield of 5.70%.

Ecopetrol S.A., an integrated oil company, engages in the exploration, development, and production of crude oil and natural gas. As of December 31, 2011, its proved reserves of crude oil and natural gas totaled 1,856.7 million barrels of oil equivalent. The company has a P/E ratio of 8.26.

The average volume for Ecopetrol S.A has been 530,100 shares per day over the past 30 days. Ecopetrol S.A has a market cap of $101.9 billion and is part of the energy industry. Shares are down 16.8% year to date as of the close of trading on Thursday.

TheStreet Ratings rates Ecopetrol S.A as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and increase in net income. 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 1.3%. Since the same quarter one year prior, revenues rose by 15.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has significantly increased by 53.01% to $4,898.80 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 20.25%.
  • 42.60% is the gross profit margin for ECOPETROL SA which we consider to be strong. Regardless of EC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EC's net profit margin of 20.48% significantly outperformed against the industry.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Oil, Gas & Consumable Fuels industry average. The net income increased by 0.8% when compared to the same quarter one year prior, going from $2,202.93 million to $2,220.02 million.
  • EC's debt-to-equity ratio is very low at 0.21 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that EC's debt-to-equity ratio is low, the quick ratio, which is currently 0.63, displays a potential problem in covering short-term cash needs.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

Other helpful dividend tools from TheStreet:

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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