Best Of The Buy-Rated Dividend Stocks: Top 3 Companies: AEP, OKS, VTR

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: 4.30%

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 19.61.

The average volume for American Electric Power has been 3,622,500 shares per day over the past 30 days. American Electric Power has a market cap of $22.7 billion and is part of the utilities industry. Shares are down 0.5% year-to-date as of the close of trading on Tuesday.

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, 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:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 2.1%. 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. The firm also exceeded the industry average cash flow growth rate of 4.41%.
  • 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. Regardless of the strong results of the gross profit margin, the net profit margin of 10.36% trails the industry average.
  • 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 11.0% 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 ($3.20 versus $2.60).

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

ONEOK Partners L.P

Dividend Yield: 5.70%

ONEOK Partners L.P (NYSE: OKS) shares currently have a dividend yield of 5.70%.

ONEOK Partners, L.P. engages in the gathering, processing, storage, and transportation of natural gas in the United States. It operates in three segments: Natural Gas Gathering and Processing, Natural Gas Pipelines, and Natural Gas Liquids. The company has a P/E ratio of 21.59.

The average volume for ONEOK Partners L.P has been 401,500 shares per day over the past 30 days. ONEOK Partners L.P has a market cap of $8.0 billion and is part of the energy industry. Shares are down 4.4% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates ONEOK Partners L.P as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth and good 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:
  • The revenue growth came in higher than the industry average of 5.6%. Since the same quarter one year prior, revenues rose by 23.1%. 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 $270.66 million or 42.04% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 2.81%.
  • The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 6.9% when compared to the same quarter one year ago, dropping from $232.28 million to $216.31 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, ONEOK PARTNERS -LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • The gross profit margin for ONEOK PARTNERS -LP is currently extremely low, coming in at 9.61%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 6.90% is above that of the industry average.

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

Ventas

Dividend Yield: 4.80%

Ventas (NYSE: VTR) shares currently have a dividend yield of 4.80%.

Ventas, Inc. is a publicly owned real estate investment trust. The firm engages in investment, management, financing, and leasing of properties in the healthcare industry. It invests in the real estate markets of the United States and Canada. The company has a P/E ratio of 36.98.

The average volume for Ventas has been 1,632,300 shares per day over the past 30 days. Ventas has a market cap of $17.6 billion and is part of the real estate industry. Shares are up 4.6% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Ventas as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, 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:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.6%. Since the same quarter one year prior, revenues slightly increased by 8.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has increased to $327.74 million or 31.88% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 8.56%.
  • VENTAS INC has improved earnings per share by 10.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, VENTAS INC reported lower earnings of $1.04 versus $1.41 in the prior year. This year, the market expects an improvement in earnings ($1.59 versus $1.04).
  • The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry average. The net income increased by 5.7% when compared to the same quarter one year prior, going from $111.88 million to $118.30 million.

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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