Buy-Rated Dividend Stocks: Top 3 Companies: GRMN, WR, PNW

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

Garmin

Dividend Yield: 4.20%

Garmin (NASDAQ: GRMN) shares currently have a dividend yield of 4.20%.

Garmin Ltd. is a worldwide provider of navigation, communications and information devices, most of which are enabled by global positioning system (GPS) technology. The company has a P/E ratio of 15.80.

The average volume for Garmin has been 1,241,800 shares per day over the past 30 days. Garmin has a market cap of $8.3 billion and is part of the electronics industry. Shares are up 4.7% 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 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:
  • 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. To add to this, GRMN has a quick ratio of 1.92, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for GARMIN LTD is rather high; currently it is at 56.90%. Regardless of GRMN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GRMN's net profit margin of 24.76% 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.
  • GRMN, with its decline in revenue, underperformed when compared the industry average of 20.9%. Since the same quarter one year prior, revenues slightly dropped by 3.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • GARMIN LTD's earnings per share declined by 7.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings 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 13.7% in earnings ($2.39 versus $2.77).

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

Westar Energy

Dividend Yield: 4.50%

Westar Energy (NYSE: WR) shares currently have a dividend yield of 4.50%.

Westar Energy, Inc., an electric utility, engages in the generation, transmission, and distribution of electricity in Kansas. The company has a P/E ratio of 12.82.

The average volume for Westar Energy has been 767,600 shares per day over the past 30 days. Westar Energy has a market cap of $3.9 billion and is part of the utilities industry. Shares are up 6.1% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates Westar Energy as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, notable return on equity, growth in earnings per share and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Electric Utilities industry average, but is less than that of the S&P 500. The net income increased by 7.1% when compared to the same quarter one year prior, going from $62.73 million to $67.19 million.
  • WR's revenue growth trails the industry average of 16.1%. Since the same quarter one year prior, revenues slightly increased by 0.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the 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 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.
  • WESTAR ENERGY INC has improved earnings per share by 8.3% 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, WESTAR ENERGY INC increased its bottom line by earning $2.14 versus $1.96 in the prior year. For the next year, the market is expecting a contraction of 0.9% in earnings ($2.12 versus $2.14).
  • In its most recent trading session, WR has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.

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

Pinnacle West Capital Corporation

Dividend Yield: 4.10%

Pinnacle West Capital Corporation (NYSE: PNW) shares currently have a dividend yield of 4.10%.

Electric utility. Arizona Public Service Co. is the utility subsidiary. Set Energy - Type of Energy Company: Utility. The company has a P/E ratio of 13.75.

The average volume for Pinnacle West Capital Corporation has been 793,800 shares per day over the past 30 days. Pinnacle West Capital Corporation has a market cap of $5.8 billion and is part of the utilities industry. Shares are up 3.8% year to date as of the close of trading on Wednesday.

TheStreet Ratings rates Pinnacle West Capital Corporation as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • PINNACLE WEST CAPITAL CORP has improved earnings per share by 5.3% 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, PINNACLE WEST CAPITAL CORP increased its bottom line by earning $3.50 versus $2.99 in the prior year. This year, the market expects an improvement in earnings ($3.64 versus $3.50).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Electric Utilities industry average, but is less than that of the S&P 500. The net income increased by 7.2% when compared to the same quarter one year prior, going from $122.35 million to $131.21 million.
  • PNW's revenue growth trails the industry average of 16.1%. Since the same quarter one year prior, revenues slightly increased by 4.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.86, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.24 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • 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, PINNACLE WEST CAPITAL 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.

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