Buy-Rated Dividend Stocks In The Top 3: RGP, GSK, TE

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."

Regency Energy Partners

Dividend Yield: 6.60%

Regency Energy Partners (NYSE: RGP) shares currently have a dividend yield of 6.60%.

Regency Energy Partners LP is engaged in the gathering and processing, compression, treating, and transportation of natural gas; and the transportation, fractionation, and storage of natural gas liquids (NGLs). The company has a P/E ratio of 126.13.

The average volume for Regency Energy Partners has been 1,024,500 shares per day over the past 30 days. Regency Energy Partners has a market cap of $10.4 billion and is part of the energy industry. Shares are up 12% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates Regency Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • RGP's very impressive revenue growth greatly exceeded the industry average of 3.1%. Since the same quarter one year prior, revenues leaped by 59.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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 131.0% when compared to the same quarter one year prior, rising from -$29.00 million to $9.00 million.
  • Net operating cash flow has significantly increased by 179.10% to $187.00 million when compared to the same quarter last year. In addition, REGENCY ENERGY PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of 17.38%.
  • REGENCY 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, REGENCY ENERGY PARTNERS LP reported lower earnings of $0.03 versus $0.13 in the prior year. This year, the market expects an improvement in earnings ($0.52 versus $0.03).
  • RGP's debt-to-equity ratio of 0.63 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.72 is weak.

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

GlaxoSmithKline

Dividend Yield: 4.70%

GlaxoSmithKline (NYSE: GSK) shares currently have a dividend yield of 4.70%.

GlaxoSmithKline plc creates, discovers, develops, manufactures, and markets pharmaceutical products, such as vaccines, over-the-counter medicines, and health-related consumer products worldwide. The company has a P/E ratio of 18.69.

The average volume for GlaxoSmithKline has been 2,582,300 shares per day over the past 30 days. GlaxoSmithKline has a market cap of $131.8 billion and is part of the drugs industry. Shares are up 2.1% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates GlaxoSmithKline as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, 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:
  • 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 Pharmaceuticals industry and the overall market, GLAXOSMITHKLINE PLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • GLAXOSMITHKLINE PLC's earnings per share declined by 24.6% 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, GLAXOSMITHKLINE PLC increased its bottom line by earning $3.68 versus $2.92 in the prior year. This year, the market expects an improvement in earnings ($108.22 versus $3.68).
  • The gross profit margin for GLAXOSMITHKLINE PLC is rather high; currently it is at 69.50%. Regardless of GSK'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 11.84% trails the industry average.
  • GSK, with its decline in revenue, slightly underperformed the industry average of 5.3%. Since the same quarter one year prior, revenues slightly dropped by 5.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • In its most recent trading session, GSK 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.

TECO Energy

Dividend Yield: 5.10%

TECO Energy (NYSE: TE) shares currently have a dividend yield of 5.10%.

TECO Energy, Inc., an electric and gas utility holding company, is engaged in the regulated electric and gas utility operations. The company has a P/E ratio of 18.32.

The average volume for TECO Energy has been 2,013,400 shares per day over the past 30 days. TECO Energy has a market cap of $3.8 billion and is part of the utilities industry. Shares are up 0.9% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates TECO Energy as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, growth in earnings per share, increase in net income and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.7%. Since the same quarter one year prior, revenues slightly increased by 3.5%. 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 $186.90 million or 18.36% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 8.03%.
  • TECO ENERGY INC has improved earnings per share by 15.8% 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, TECO ENERGY INC reported lower earnings of $0.92 versus $1.13 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus $0.92).
  • The net income growth from the same quarter one year ago has exceeded that of the Multi-Utilities industry average, but is less than that of the S&P 500. The net income increased by 20.7% when compared to the same quarter one year prior, going from $41.50 million to $50.10 million.
  • In its most recent trading session, TE 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.

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