5 Buy-Rated Dividend Stocks: AEP, GRMN, GAS, FE, EPD

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

American Electric Power

Dividend Yield: 4.30%

American Electric Power (NYSE: AEP) shares currently have a dividend yield of 4.30%.

American Electric Power Company, Inc., a public utility holding company, engages in the generation, transmission, and distribution of electric power to retail customers. The company generates electricity using coal and lignite, natural gas, nuclear energy, and hydroelectric energy. The company has a P/E ratio of 18.00.

The average volume for American Electric Power has been 3,066,000 shares per day over the past 30 days. American Electric Power has a market cap of $22.3 billion and is part of the utilities industry. Shares are up 4.9% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates American Electric Power as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year and reasonable valuation levels. 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 14.0%. Since the same quarter one year prior, revenues slightly increased by 5.5%. 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.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
  • AMERICAN ELECTRIC POWER CO's earnings per share declined by 6.3% 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, AMERICAN ELECTRIC POWER CO reported lower earnings of $2.60 versus $3.24 in the prior year. This year, the market expects an improvement in earnings ($3.15 versus $2.60).
  • Even though the current debt-to-equity ratio is 1.22, it is still below the industry average, suggesting that this level of debt is acceptable within the Electric Utilities industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.34 is very low and demonstrates very weak liquidity.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

Garmin

Dividend Yield: 5.00%

Garmin (NASDAQ: GRMN) shares currently have a dividend yield of 5.00%.

Garmin Ltd., together with its subsidiaries, designs, develops, manufactures, and markets global positioning system (GPS) enabled products and other navigation, communication, and information products for the automotive/mobile, outdoor, fitness, marine, and general aviation markets worldwide. The company has a P/E ratio of 12.91.

The average volume for Garmin has been 1,116,900 shares per day over the past 30 days. Garmin has a market cap of $7.4 billion and is part of the electronics industry. Shares are down 12.2% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates Garmin as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins, growth in earnings per share 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:
  • GRMN has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.79, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for GARMIN LTD is rather high; currently it is at 54.30%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 16.66% significantly outperformed against the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 11.2%. Since the same quarter one year prior, revenues slightly dropped by 4.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • GARMIN LTD'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, GARMIN LTD increased its bottom line by earning $2.77 versus $2.67 in the prior year. For the next year, the market is expecting a contraction of 14.8% in earnings ($2.36 versus $2.77).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Household Durables industry average, but is greater than that of the S&P 500. The net income increased by 2.1% when compared to the same quarter one year prior, going from $86.86 million to $88.67 million.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

AGL Resources

Dividend Yield: 4.30%

AGL Resources (NYSE: GAS) shares currently have a dividend yield of 4.30%.

AGL Resources Inc., an energy services holding company, distributes natural gas to residential, commercial, industrial, and governmental customers in Illinois, Georgia, Virginia, New Jersey, Florida, Tennessee, and Maryland. The company has a P/E ratio of 17.41.

The average volume for AGL Resources has been 497,200 shares per day over the past 30 days. AGL Resources has a market cap of $5.2 billion and is part of the utilities industry. Shares are up 7% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates AGL Resources as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, attractive valuation levels, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 9.7%. Since the same quarter one year prior, revenues rose by 21.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • AGL RESOURCES INC has improved earnings per share by 18.0% 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, AGL RESOURCES INC increased its bottom line by earning $2.31 versus $2.15 in the prior year. This year, the market expects an improvement in earnings ($2.64 versus $2.31).
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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 exceeded that of the S&P 500, but is less than that of the Gas Utilities industry average. The net income increased by 18.5% when compared to the same quarter one year prior, going from $130.00 million to $154.00 million.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

FirstEnergy

Dividend Yield: 5.80%

FirstEnergy (NYSE: FE) shares currently have a dividend yield of 5.80%.

FirstEnergy Corp., a diversified energy holding company, engages in the generation, transmission, and distribution of electricity in the United States. The company operates in Regulated Distribution, Regulated Transmission, and Competitive Energy Services segments. The company has a P/E ratio of 24.21.

The average volume for FirstEnergy has been 3,147,100 shares per day over the past 30 days. FirstEnergy has a market cap of $16.0 billion and is part of the utilities industry. Shares are down 10.9% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates FirstEnergy as a buy. Among the primary strengths of the company is its generally strong cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 112.10% to $50.00 million when compared to the same quarter last year. In addition, FIRSTENERGY CORP has also vastly surpassed the industry average cash flow growth rate of 12.45%.
  • FIRSTENERGY CORP's earnings per share declined by 35.6% 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, FIRSTENERGY CORP reported lower earnings of $1.84 versus $2.13 in the prior year. This year, the market expects an improvement in earnings ($3.00 versus $1.84).
  • FE, with its decline in revenue, underperformed when compared the industry average of 14.0%. Since the same quarter one year prior, revenues slightly dropped by 6.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Currently the debt-to-equity ratio of 1.56 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.27, which clearly demonstrates the inability to cover short-term cash needs.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Electric Utilities industry and the overall market, FIRSTENERGY CORP's return on equity is below that of both the industry average and the S&P 500.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

Enterprise Products Partners

Dividend Yield: 4.40%

Enterprise Products Partners (NYSE: EPD) shares currently have a dividend yield of 4.40%.

Enterprise Products Partners L.P. provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products, and petrochemicals in the United States and internationally. The company has a P/E ratio of 21.60.

The average volume for Enterprise Products Partners has been 1,201,600 shares per day over the past 30 days. Enterprise Products Partners has a market cap of $55.3 billion and is part of the energy industry. Shares are up 20.2% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates Enterprise Products Partners as a buy. The company's strengths can be seen in multiple areas, such as its 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 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:
  • The revenue growth came in higher than the industry average of 10.6%. Since the same quarter one year prior, revenues slightly increased by 1.2%. 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.
  • ENTERPRISE PRODS PRTNRS -LP has improved earnings per share by 13.7% 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, ENTERPRISE PRODS PRTNRS -LP increased its bottom line by earning $2.71 versus $2.37 in the prior year. This year, the market expects an improvement in earnings ($2.94 versus $2.71).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry average. The net income increased by 15.7% when compared to the same quarter one year prior, going from $651.30 million to $753.50 million.
  • Net operating cash flow has significantly increased by 65.30% to $999.90 million when compared to the same quarter last year. In addition, ENTERPRISE PRODS PRTNRS -LP has also vastly surpassed the industry average cash flow growth rate of -25.53%.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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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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