3 Buy-Rated Dividend Stocks Leading The Pack: WGL, EPB, RCI

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: 4.20%

WGL Holdings (NYSE: WGL) shares currently have a dividend yield of 4.20%.

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 119.83.

The average volume for WGL Holdings has been 254,500 shares per day over the past 30 days. WGL Holdings has a market cap of $2.2 billion and is part of the utilities industry. Shares are up 4.4% year-to-date as of the close of trading on Monday.

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 35.9%. 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 ($2.45 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.
  • In its most recent trading session, WGL 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 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.

El Paso Pipeline Partners

Dividend Yield: 7.30%

El Paso Pipeline Partners (NYSE: EPB) shares currently have a dividend yield of 7.30%.

El Paso Pipeline Partners, L.P. owns and operates interstate natural gas transportation and terminaling facilities in the United States. The company has a P/E ratio of 19.61.

The average volume for El Paso Pipeline Partners has been 802,600 shares per day over the past 30 days. El Paso Pipeline Partners has a market cap of $7.8 billion and is part of the energy industry. Shares are down 2.4% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates El Paso Pipeline Partners as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins and notable return on equity. 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 gross profit margin for EL PASO PIPELINE PARTNERS LP is currently very high, coming in at 82.46%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 45.28% 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. In comparison to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, EL PASO PIPELINE PARTNERS LP has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.2%. Since the same quarter one year prior, revenues slightly dropped by 1.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 0.6% when compared to the same quarter one year ago, dropping from $174.00 million to $173.00 million.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, EPB has underperformed the S&P 500 Index, declining 18.50% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it is one of the factors that makes this stock an attractive investment.

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

Rogers Communications

Dividend Yield: 4.10%

Rogers Communications (NYSE: RCI) shares currently have a dividend yield of 4.10%.

Rogers Communications Inc. operates as a communications and media company in Canada. Its Wireless segment provides wireless voice and high-speed data communication services to consumers and businesses under the Rogers, Fido, and Chatr brands; and wireless devices and applications. The company has a P/E ratio of 13.82.

The average volume for Rogers Communications has been 325,200 shares per day over the past 30 days. Rogers Communications has a market cap of $16.3 billion and is part of the telecommunications industry. Shares are down 12.3% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Rogers Communications as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins and notable return on equity. 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:
  • 38.21% is the gross profit margin for ROGERS COMMUNICATIONS which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, RCI's net profit margin of 10.16% significantly trails the industry average.
  • RCI, with its decline in revenue, slightly underperformed the industry average of 2.4%. Since the same quarter one year prior, revenues slightly dropped by 0.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Wireless Telecommunication Services industry and the overall market, ROGERS COMMUNICATIONS's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • In its most recent trading session, RCI 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, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • ROGERS COMMUNICATIONS's earnings per share declined by 16.2% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, ROGERS COMMUNICATIONS reported lower earnings of $3.13 versus $3.30 in the prior 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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