Buy-Rated Dividend Stocks In The Top 3: TAL, ETP, ARCC

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 which could 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."

TAL International Group

Dividend Yield: 6.90%

TAL International Group (NYSE: TAL) shares currently have a dividend yield of 6.90%.

TAL International Group, Inc., together with its subsidiaries, leases intermodal transportation equipment and provides maritime container management services worldwide. The company operates in two segments, Equipment Leasing and Equipment Trading. The company has a P/E ratio of 9.81.

The average volume for TAL International Group has been 679,300 shares per day over the past 30 days. TAL International Group has a market cap of $1.4 billion and is part of the diversified services industry. Shares are down 27.8% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates TAL International Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and good cash flow from operations. 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 6.5%. Since the same quarter one year prior, revenues slightly increased by 3.0%. 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 TAL INTERNATIONAL GROUP INC is currently very high, coming in at 89.93%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 21.17% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $108.23 million or 41.33% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 10.99%.
  • TAL INTERNATIONAL GROUP INC's earnings per share declined by 10.1% 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, TAL INTERNATIONAL GROUP INC increased its bottom line by earning $4.25 versus $3.87 in the prior year. For the next year, the market is expecting a contraction of 3.8% in earnings ($4.09 versus $4.25).
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, TAL has underperformed the S&P 500 Index, declining 6.04% from its price level of one year ago. 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.

Energy Transfer Partners L.P

Dividend Yield: 6.90%

Energy Transfer Partners L.P (NYSE: ETP) shares currently have a dividend yield of 6.90%.

Energy Transfer Partners, L.P. is engaged in the natural gas midstream, and intrastate transportation and storage businesses in the United States.

The average volume for Energy Transfer Partners L.P has been 913,200 shares per day over the past 30 days. Energy Transfer Partners L.P has a market cap of $16.9 billion and is part of the energy industry. Shares are down 7.3% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Energy Transfer Partners L.P as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations 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:
  • The revenue growth came in higher than the industry average of 7.8%. Since the same quarter one year prior, revenues slightly increased by 9.6%. 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 significantly increased by 142.63% to $631.00 million when compared to the same quarter last year. In addition, ENERGY TRANSFER PARTNERS -LP has also vastly surpassed the industry average cash flow growth rate of -23.37%.
  • 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.
  • ENERGY TRANSFER PARTNERS -LP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, ENERGY TRANSFER PARTNERS -LP swung to a loss, reporting -$0.24 versus $5.76 in the prior year. This year, the market expects an improvement in earnings ($2.47 versus -$0.24).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 276.2% when compared to the same quarter one year ago, falling from $307.00 million to -$541.00 million.

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

Ares Capital Corporation

Dividend Yield: 8.70%

Ares Capital Corporation (NASDAQ: ARCC) shares currently have a dividend yield of 8.70%.

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 9.51.

The average volume for Ares Capital Corporation has been 1,945,900 shares per day over the past 30 days. Ares Capital Corporation has a market cap of $5.2 billion and is part of the financial services industry. Shares are down 2.1% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Ares Capital Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 16.8%. Since the same quarter one year prior, revenues rose by 10.2%. 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 rather high; currently it is at 69.04%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 57.27% significantly outperformed against the industry average.
  • 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. 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.
  • ARES CAPITAL CORP's earnings per share declined by 33.8% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, ARES CAPITAL CORP reported lower earnings of $1.81 versus $2.20 in the prior year. For the next year, the market is expecting a contraction of 10.2% in earnings ($1.63 versus $1.81).

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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