Best 5 Yielding Buy-Rated Stocks: ETR, TEG, ARCC, WR, PPL

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: 5.40%

Entergy (NYSE: ETR) shares currently have a dividend yield of 5.40%.

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 12.71.

The average volume for Entergy has been 1,484,400 shares per day over the past 30 days. Entergy has a market cap of $10.9 billion and is part of the utilities industry. Shares are down 3.1% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Entergy as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations 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:
  • The revenue growth came in higher than the industry average of 2.3%. Since the same quarter one year prior, revenues rose by 13.1%. 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 slightly increased to $1,083.55 million or 5.00% when compared to the same quarter last year. In addition, ENTERGY CORP has also modestly surpassed the industry average cash flow growth rate of 3.73%.
  • 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, ENTERGY CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • ENTERGY CORP's earnings per share declined by 29.1% 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 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 ($5.04 versus $4.75).
  • In its most recent trading session, ETR 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. 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.

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

Integrys Energy Group

Dividend Yield: 5.10%

Integrys Energy Group (NYSE: TEG) shares currently have a dividend yield of 5.10%.

Integrys Energy Group, Inc., a diversified energy holding company, engages in regulated and non regulated energy operations in the United States. The company has a P/E ratio of 15.06.

The average volume for Integrys Energy Group has been 404,400 shares per day over the past 30 days. Integrys Energy Group has a market cap of $4.3 billion and is part of the utilities industry. Shares are down 1.5% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Integrys Energy Group as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels 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:
  • The revenue growth came in higher than the industry average of 0.3%. Since the same quarter one year prior, revenues rose by 21.8%. 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 debt-to-equity ratio is somewhat low, currently at 0.99, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • 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 Multi-Utilities industry and the overall market on the basis of return on equity, INTEGRYS ENERGY GROUP INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • INTEGRYS ENERGY GROUP INC's earnings per share declined by 48.4% 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, INTEGRYS ENERGY GROUP INC increased its bottom line by earning $3.68 versus $2.88 in the prior year. For the next year, the market is expecting a contraction of 4.9% in earnings ($3.50 versus $3.68).

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

Ares Capital Corporation

Dividend Yield: 8.60%

Ares Capital Corporation (NASDAQ: ARCC) shares currently have a dividend yield of 8.60%.

Ares Capital Corporation specializes in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle market companies. It also makes growth capital and general refinancing. The company has a P/E ratio of 8.53.

The average volume for Ares Capital Corporation has been 1,917,200 shares per day over the past 30 days. Ares Capital Corporation has a market cap of $5.0 billion and is part of the financial services industry. Shares are down 0.2% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Ares Capital Corporation as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels, expanding profit margins, notable return on equity 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 revenue growth greatly exceeded the industry average of 14.8%. Since the same quarter one year prior, revenues rose by 29.5%. 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 gross profit margin for ARES CAPITAL CORP is currently very high, coming in at 70.76%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 57.04% significantly outperformed against the industry average.
  • 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 Capital Markets industry and the overall market on the basis of return on equity, ARES CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • In its most recent trading session, ARCC 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.

Westar Energy

Dividend Yield: 4.20%

Westar Energy (NYSE: WR) shares currently have a dividend yield of 4.20%.

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 14.01.

The average volume for Westar Energy has been 985,400 shares per day over the past 30 days. Westar Energy has a market cap of $4.1 billion and is part of the utilities industry. Shares are up 0.9% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Westar Energy as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • WESTAR ENERGY INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, WESTAR ENERGY INC increased its bottom line by earning $2.14 versus $1.96 in the prior year. This year, the market expects an improvement in earnings ($2.25 versus $2.14).
  • 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.
  • 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.
  • 42.17% is the gross profit margin for WESTAR ENERGY INC which we consider to be strong. Regardless of WR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WR's net profit margin of 19.15% compares favorably to the industry average.
  • WR, with its decline in revenue, slightly underperformed the industry average of 2.3%. 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.

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

PPL

Dividend Yield: 4.90%

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

PPL Corporation, an energy and utility holding company, engages in the generation, transmission, distribution, and sale of electricity to wholesale and retail customers in the United States and the United Kingdom. The company operates in four segments: Kentucky Regulated, U.K. The company has a P/E ratio of 11.95.

The average volume for PPL has been 3,987,800 shares per day over the past 30 days. PPL has a market cap of $18.8 billion and is part of the utilities industry. Shares are down 1.1% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates PPL 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, attractive valuation levels 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:
  • The revenue growth came in higher than the industry average of 2.3%. Since the same quarter one year prior, revenues rose by 30.1%. 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 $1,276.00 million or 11.24% when compared to the same quarter last year. In addition, PPL CORP has also modestly surpassed the industry average cash flow growth rate of 3.73%.
  • 37.43% is the gross profit margin for PPL CORP which we consider to be strong. Regardless of PPL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 13.11% trails the industry average.
  • 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 Electric Utilities industry average. The net income increased by 15.5% when compared to the same quarter one year prior, going from $355.00 million to $410.00 million.

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

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