Buy-Rated Dividend Stocks: Top 3 Companies: ED, AINV, 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."

Consolidated Edison

Dividend Yield: 4.40%

Consolidated Edison (NYSE: ED) shares currently have a dividend yield of 4.40%.

Consolidated Edison, Inc. is engaged in regulated electric, gas, and steam delivery businesses in the United States. The company has a P/E ratio of 13.78.

The average volume for Consolidated Edison has been 2,206,700 shares per day over the past 30 days. Consolidated Edison has a market cap of $16.9 billion and is part of the utilities industry. Shares are up 3.3% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Consolidated Edison as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, attractive valuation levels, good cash flow from operations and impressive record of earnings per share growth. 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 8.0%. Since the same quarter one year prior, revenues rose by 19.0%. 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 Multi-Utilities industry. The net income increased by 88.0% when compared to the same quarter one year prior, rising from $192.00 million to $361.00 million.
  • Net operating cash flow has significantly increased by 366.66% to $224.00 million when compared to the same quarter last year. In addition, CONSOLIDATED EDISON INC has also vastly surpassed the industry average cash flow growth rate of 7.95%.
  • 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, CONSOLIDATED EDISON INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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

Apollo Investment

Dividend Yield: 9.30%

Apollo Investment (NASDAQ: AINV) shares currently have a dividend yield of 9.30%.

Apollo Investment Corporation is business development company and operates as a closed-end management investment company. The company invests in middle market companies. It provides direct equity capital, mezzanine and senior secured loans, and subordinated debt and loans. The company has a P/E ratio of 7.30.

The average volume for Apollo Investment has been 3,055,300 shares per day over the past 30 days. Apollo Investment has a market cap of $2.0 billion and is part of the financial services industry. Shares are up 3% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Apollo Investment as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, increase in net income, 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 came in higher than the industry average of 5.2%. Since the same quarter one year prior, revenues rose by 13.9%. 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 APOLLO INVESTMENT CORP is currently very high, coming in at 70.09%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 72.51% significantly outperformed against the industry average.
  • The net income growth from the same quarter one year ago has exceeded that of the Capital Markets industry average, but is less than that of the S&P 500. The net income increased by 6.2% when compared to the same quarter one year prior, going from $65.82 million to $69.91 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, APOLLO INVESTMENT CORP 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.

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: 4.80%

TECO Energy (NYSE: TE) shares currently have a dividend yield of 4.80%.

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 19.45.

The average volume for TECO Energy has been 2,089,700 shares per day over the past 30 days. TECO Energy has a market cap of $4.0 billion and is part of the utilities industry. Shares are up 6.5% year-to-date as of the close of trading on Tuesday.

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, increase in stock price during the past year, growth in earnings per share and increase in net income. 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 8.0%. 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 7.95%.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.
  • 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.

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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