3 Buy-Rated Dividend Stocks Leading The Pack: WGL, MWE, EEP

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."

WGL Holdings

Dividend Yield: 4.40%

WGL Holdings (NYSE: WGL) shares currently have a dividend yield of 4.40%.

WGL Holdings, Inc., through its subsidiaries, sells and delivers natural gas, and provides energy-related products and services. The company operates in four segments: Regulated Utility, Retail Energy-Marketing, Commercial Energy Systems, and Midstream Energy Services. The company has a P/E ratio of 113.71.

The average volume for WGL Holdings has been 273,400 shares per day over the past 30 days. WGL Holdings has a market cap of $2.1 billion and is part of the utilities industry. Shares are down 0.7% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates WGL Holdings as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. 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 36.0%. Since the same quarter one year prior, revenues rose by 31.7%. 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 0.70, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that WGL's debt-to-equity ratio is low, the quick ratio, which is currently 0.57, displays a potential problem in covering short-term cash needs.
  • WGL HOLDINGS INC's earnings per share declined by 31.8% 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, WGL HOLDINGS INC reported lower earnings of $1.55 versus $2.71 in the prior year. This year, the market expects an improvement in earnings ($2.46 versus $1.55).
  • 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 Gas Utilities industry. The net income has significantly decreased by 31.5% when compared to the same quarter one year ago, falling from $89.84 million to $61.54 million.
  • The share price of WGL HOLDINGS INC has not done very well: it is down 10.96% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Despite the stock's decline during the last year, it is still somewhat more expensive (in proportion to its earnings over the last year) than most other stocks in its industry. We feel, however, that other strengths this company displays offset this slight negative.

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

MarkWest Energy Partners

Dividend Yield: 5.60%

MarkWest Energy Partners (NYSE: MWE) shares currently have a dividend yield of 5.60%.

MarkWest Energy Partners, L.P. is engaged in the gathering, processing, and transportation of natural gas. The company is also engaged in the gathering, transportation, fractionation, storage, and marketing of natural gas liquids; and the gathering and transportation of crude oil. The company has a P/E ratio of 144.40.

The average volume for MarkWest Energy Partners has been 1,032,300 shares per day over the past 30 days. MarkWest Energy Partners has a market cap of $10.1 billion and is part of the energy industry. Shares are down 6.1% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates MarkWest Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income, good cash flow from operations, growth in earnings per share and expanding profit margins. 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 greatly exceeded the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 37.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 180.8% when compared to the same quarter one year prior, rising from -$15.46 million to $12.49 million.
  • Net operating cash flow has increased to $112.37 million or 32.13% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 17.08%.
  • MARKWEST ENERGY PARTNERS LP reported significant earnings per share improvement 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, MARKWEST ENERGY PARTNERS LP reported lower earnings of $0.21 versus $1.70 in the prior year. This year, the market expects an improvement in earnings ($0.97 versus $0.21).
  • 43.96% is the gross profit margin for MARKWEST ENERGY PARTNERS LP which we consider to be strong. Regardless of MWE'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 2.43% trails 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.

Enbridge Energy Partners

Dividend Yield: 7.00%

Enbridge Energy Partners (NYSE: EEP) shares currently have a dividend yield of 7.00%.

Enbridge Energy Partners, L.P. owns and operates crude oil and liquid petroleum transportation and storage assets; and natural gas gathering, treating, processing, transportation, and marketing assets in the United States. It operates through three segments: Liquids, Natural Gas, and Marketing. The company has a P/E ratio of 208.27.

The average volume for Enbridge Energy Partners has been 779,700 shares per day over the past 30 days. Enbridge Energy Partners has a market cap of $7.9 billion and is part of the energy industry. Shares are up 4.6% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Enbridge Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, growth in earnings per share 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 3.0%. Since the same quarter one year prior, revenues rose by 22.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 243.3% when compared to the same quarter one year prior, rising from -$83.30 million to $119.40 million.
  • Net operating cash flow has slightly increased to $210.80 million or 2.37% when compared to the same quarter last year. Despite an increase in cash flow, ENBRIDGE ENERGY PRTNRS -LP's cash flow growth rate is still lower than the industry average growth rate of 17.08%.
  • ENBRIDGE ENERGY PRTNRS -LP reported significant earnings per share improvement 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, ENBRIDGE ENERGY PRTNRS -LP swung to a loss, reporting -$0.38 versus $1.25 in the prior year. This year, the market expects an improvement in earnings ($0.93 versus -$0.38).
  • In its most recent trading session, EEP 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. Despite the decline in its share price over the last year, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry. We feel, however, that other strengths this company displays compensate for this.

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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