5 Buy-Rated Dividend Stocks: ETR, CXW, FE, KMI, SDRL

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 or Stephanie Link.

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."

Entergy

Dividend Yield: 4.90%

Entergy (NYSE: ETR) shares currently have a dividend yield of 4.90%.

Entergy Corporation, together with its subsidiaries, engages in the electric power production and retail electric distribution operations in the United States. The company generates electricity through various sources, such as gas/oil, nuclear, coal, and hydro power. The company has a P/E ratio of 16.36.

The average volume for Entergy has been 1,434,200 shares per day over the past 30 days. Entergy has a market cap of $12.1 billion and is part of the utilities industry. Shares are up 7% year to date as of the close of trading on Friday.

TheStreet Ratings rates Entergy as a buy. Among the primary strengths of the company is its revenue growth. 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 17.3%. Since the same quarter one year prior, revenues slightly increased by 8.7%. 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.
  • ENTERGY CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ENTERGY CORP reported lower earnings of $4.75 versus $7.54 in the prior year. This year, the market expects an improvement in earnings ($4.95 versus $4.75).
  • The gross profit margin for ENTERGY CORP is currently lower than what is desirable, coming in at 25.69%. Regardless of ETR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.13% trails the industry average.
  • The share price of ENTERGY CORP has not done very well: it is down 6.45% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
  • 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. 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.

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

Corrections Corporation of America

Dividend Yield: 5.80%

Corrections Corporation of America (NYSE: CXW) shares currently have a dividend yield of 5.80%.

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 10.96.

The average volume for Corrections Corporation of America has been 1,457,400 shares per day over the past 30 days. Corrections Corporation of America has a market cap of $3.4 billion and is part of the diversified services industry. Shares are down 6.4% year to date as of the close of trading on Friday.

TheStreet Ratings rates Corrections Corporation of America 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 good cash flow from operations. 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:
  • CORRECTIONS CORP AMER reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, CORRECTIONS CORP AMER increased its bottom line by earning $1.56 versus $1.55 in the prior year. This year, the market expects an improvement in earnings ($2.01 versus $1.56).
  • 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 471.6% when compared to the same quarter one year prior, rising from $31.68 million to $181.09 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CORRECTIONS CORP AMER's return on equity exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $96.86 million or 41.79% when compared to the same quarter last year. In addition, CORRECTIONS CORP AMER has also vastly surpassed the industry average cash flow growth rate of -81.00%.

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 3,350,500 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 8.4% year to date as of the close of trading on Friday.

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 -1.65%.
  • 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 17.3%. 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.

Kinder Morgan

Dividend Yield: 4.20%

Kinder Morgan (NYSE: KMI) shares currently have a dividend yield of 4.20%.

Kinder Morgan, Inc. owns and operates energy transportation and storage assets in the United States and Canada. The company operates in six segments: Natural Gas Pipelines, Products Pipelines KMP, CO2 KMP, Terminals KMP, Kinder Morgan Canada KMP, and Other.

The average volume for Kinder Morgan has been 3,682,400 shares per day over the past 30 days. Kinder Morgan has a market cap of $39.3 billion and is part of the energy industry. Shares are up 6.6% year to date as of the close of trading on Friday.

TheStreet Ratings rates Kinder Morgan as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, expanding profit margins, growth in earnings per share and increase in stock price during the past year. 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:
  • KMI's very impressive revenue growth greatly exceeded the industry average of 6.2%. Since the same quarter one year prior, revenues leaped by 56.1%. 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 significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 319.8% when compared to the same quarter one year prior, rising from -$126.00 million to $277.00 million.
  • 35.98% is the gross profit margin for KINDER MORGAN INC which we consider to be strong. Regardless of KMI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, KMI's net profit margin of 8.19% compares favorably to the industry average.
  • KINDER MORGAN 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 year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, KINDER MORGAN INC increased its bottom line by earning $1.22 versus $0.55 in the prior year. For the next year, the market is expecting a contraction of 4.9% in earnings ($1.16 versus $1.22).
  • 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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

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

Seadrill

Dividend Yield: 8.10%

Seadrill (NYSE: SDRL) shares currently have a dividend yield of 8.10%.

Seadrill Limited provides offshore drilling services to the oil and gas industry worldwide. The company operates in three segments: Floaters, Jack-up Rigs, and Tender Rigs. The company has a P/E ratio of 18.49.

The average volume for Seadrill has been 2,494,200 shares per day over the past 30 days. Seadrill has a market cap of $20.3 billion and is part of the energy industry. Shares are up 17.6% year to date as of the close of trading on Friday.

TheStreet Ratings rates Seadrill 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 and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 4.9%. Since the same quarter one year prior, revenues rose by 20.5%. 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.
  • 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 Energy Equipment & Services industry and the overall market, SEADRILL LTD's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for SEADRILL LTD is rather high; currently it is at 57.23%. Regardless of SDRL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SDRL's net profit margin of 32.33% significantly outperformed against the industry.
  • 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.
  • SEADRILL LTD' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, SEADRILL LTD reported lower earnings of $2.32 versus $2.92 in the prior year. This year, the market expects an improvement in earnings ($2.81 versus $2.32).

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

Other helpful dividend tools from TheStreet:

null

More from Markets

Week Ahead: Wall Street Looks to Jobs Report as North Korea Meeting Less Certain

Week Ahead: Wall Street Looks to Jobs Report as North Korea Meeting Less Certain

Dow and S&P 500 Decline, Energy Shares Fall as U.S. Crude Oil Slides 4%

Dow and S&P 500 Decline, Energy Shares Fall as U.S. Crude Oil Slides 4%

Replay: Jim Cramer on the Markets, 10-Year Yield, Oil Prices and Foot Locker

Replay: Jim Cramer on the Markets, 10-Year Yield, Oil Prices and Foot Locker

Video: You Could Live in a Ritz-Carlton or St. Regis Home

Video: You Could Live in a Ritz-Carlton or St. Regis Home

Component Stocks Rise After Trump Reverses Decision on ZTE

Component Stocks Rise After Trump Reverses Decision on ZTE