Best 3 Yielding Buy-Rated Stocks: AEP, VZ, TEF

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."

American Electric Power

Dividend Yield: 4.20%

American Electric Power (NYSE: AEP) shares currently have a dividend yield of 4.20%.

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 20.04.

The average volume for American Electric Power has been 3,541,000 shares per day over the past 30 days. American Electric Power has a market cap of $23.2 billion and is part of the utilities industry. Shares are up 11.8% year to date as of the close of trading on Monday.

TheStreet Ratings rates American Electric Power as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, increase in stock price during the past year, expanding profit margins 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:
  • Since the same quarter one year prior, revenues slightly increased by 0.5%. 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.
  • Net operating cash flow has increased to $1,524.00 million or 27.10% when compared to the same quarter last year.
  • Compared to where it was trading one year ago, AEP is up 16.19% to its most recent closing price of 47.63. Looking ahead, although the push and pull of a bull or bear market could certainly alter the outcome, our view is that this stock's positive fundamentals give it good potential for further appreciation.
  • 35.11% is the gross profit margin for AMERICAN ELECTRIC POWER CO which we consider to be strong. It has increased from the same quarter the previous year.
  • The net income has decreased by 11.1% when compared to the same quarter one year ago, dropping from $487.00 million to $433.00 million.

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

Verizon Communications

Dividend Yield: 4.20%

Verizon Communications (NYSE: VZ) shares currently have a dividend yield of 4.20%.

Verizon Communications Inc., through its subsidiaries, provides communications, information and entertainment products and services to consumers, businesses, and governmental agencies worldwide. The company has a P/E ratio of 66.08.

The average volume for Verizon Communications has been 14,651,500 shares per day over the past 30 days. Verizon Communications has a market cap of $143.7 billion and is part of the telecommunications industry. Shares are up 16.1% year to date as of the close of trading on Monday.

TheStreet Ratings rates Verizon Communications as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, increase in net income, increase in stock price during the past year and expanding profit margins. 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:
  • Since the same quarter one year prior, revenues slightly increased by 4.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has increased to $11,239.00 million or 18.46% when compared to the same quarter last year.
  • The net income increased by 40.1% when compared to the same quarter one year prior, rising from $1,593.00 million to $2,232.00 million.
  • Compared to where it was trading one year ago, VZ is up 16.72% to its most recent closing price of 50.38. Looking ahead, although the push and pull of a bull or bear market could certainly alter the outcome, our view is that this stock's positive fundamentals give it good potential for further appreciation.
  • The gross profit margin for VERIZON COMMUNICATIONS INC is rather high; currently it is at 63.80%. It has increased from the same quarter the previous year.

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

Telefonica

Dividend Yield: 4.40%

Telefonica (NYSE: TEF) shares currently have a dividend yield of 4.40%.

Telefonica, S.A. provides fixed and mobile communication services primarily in Europe and Latin America. The company offers mobile voice, value added, mobile data and Internet, wholesale, corporate, roaming, fixed wireless, and trunking and paging services, as well as mobile payment solutions.

The average volume for Telefonica has been 1,291,900 shares per day over the past 30 days. Telefonica has a market cap of $75.1 billion and is part of the telecommunications industry. Shares are up 22.4% year to date as of the close of trading on Monday.

TheStreet Ratings rates Telefonica as a buy. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year 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:
  • Compared to where it was trading one year ago, TEF is up 26.14% to its most recent closing price of 16.31. Looking ahead, although the push and pull of a bull or bear market could certainly alter the outcome, our view is that this stock's positive fundamentals give it good potential for further appreciation.
  • The net income has decreased by 12.8% when compared to the same quarter one year ago, dropping from $1,813.14 million to $1,581.90 million.
  • Since the same quarter one year prior, revenues slightly dropped by 0.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation.
  • TELEFONICA SA's earnings per share declined by 12.5% 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, TELEFONICA SA reported lower earnings of $1.14 versus $1.57 in the prior year. This year, the market expects an improvement in earnings ($1.51 versus $1.14).

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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