Buy-Rated Dividend Stocks: Top 3 Companies: SIX, PEG, 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 3 stocks with substantial yields, that ultimately, we have rated "Buy."

Six Flags Entertainment

Dividend Yield: 5.10%

Six Flags Entertainment (NYSE: SIX) shares currently have a dividend yield of 5.10%.

Six Flags Entertainment Corporation owns and operates regional theme, water, and zoological parks. The company's parks offer various state-of-the-art and traditional thrill rides, water attractions, themed areas, concerts and shows, restaurants, game venues, and retail outlets. The company has a P/E ratio of 15.78.

The average volume for Six Flags Entertainment has been 709,800 shares per day over the past 30 days. Six Flags Entertainment has a market cap of $3.5 billion and is part of the leisure industry. Shares are up 21.8% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Six Flags Entertainment as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, 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 sub par growth in net income.

Highlights from the ratings report include:
  • SIX's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 4.0%. 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 gross profit margin for SIX FLAGS ENTERTAINMENT CORP is rather high; currently it is at 66.10%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 23.86% significantly outperformed against the industry average.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to other companies in the Hotels, Restaurants & Leisure industry and the overall market on the basis of return on equity, SIX FLAGS ENTERTAINMENT CORP has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • 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, 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.
  • SIX FLAGS ENTERTAINMENT CORP's earnings per share declined by 43.6% 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, SIX FLAGS ENTERTAINMENT CORP turned its bottom line around by earning $3.04 versus -$0.25 in the prior year. For the next year, the market is expecting a contraction of 71.4% in earnings ($0.87 versus $3.04).

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

Public Service Enterprise Group

Dividend Yield: 4.50%

Public Service Enterprise Group (NYSE: PEG) shares currently have a dividend yield of 4.50%.

Public Service Enterprise Group Incorporated, through its subsidiaries, operates as an energy company primarily in the northeastern and mid Atlantic United States. The company has a P/E ratio of 12.88.

The average volume for Public Service Enterprise Group has been 3,366,500 shares per day over the past 30 days. Public Service Enterprise Group has a market cap of $16.3 billion and is part of the utilities industry. Shares are up 6.4% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Public Service Enterprise Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, expanding profit margins, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • PEG's revenue growth has slightly outpaced the industry average of 0.1%. Since the same quarter one year prior, revenues slightly increased by 6.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 40.13% is the gross profit margin for PUBLIC SERVICE ENTRP GRP INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 15.27% trails the industry average.
  • Net operating cash flow has increased to $1,092.00 million or 17.04% when compared to the same quarter last year. Despite an increase in cash flow, PUBLIC SERVICE ENTRP GRP INC's average is still marginally south of the industry average growth rate of 25.97%.
  • The debt-to-equity ratio is somewhat low, currently at 0.75, 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 0.47 is very weak and demonstrates a lack of ability to pay short-term obligations.

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: 9.10%

Seadrill (NYSE: SDRL) shares currently have a dividend yield of 9.10%.

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 8.77.

The average volume for Seadrill has been 2,177,600 shares per day over the past 30 days. Seadrill has a market cap of $19.6 billion and is part of the energy industry. Shares are up 13.6% 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 robust revenue growth, notable return on equity, compelling growth in net income, good cash flow from operations and increase in stock price during the past year. 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:
  • SDRL's revenue growth has slightly outpaced the industry average of 9.1%. Since the same quarter one year prior, revenues rose by 17.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Energy Equipment & Services industry and the overall market, SEADRILL LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 52.1% when compared to the same quarter one year prior, rising from $188.00 million to $286.00 million.
  • Net operating cash flow has increased to $533.00 million or 29.05% when compared to the same quarter last year. Despite an increase in cash flow, SEADRILL LTD's average is still marginally south of the industry average growth rate of 31.01%.
  • 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, 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.

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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