Buy-Rated Dividend Stocks: Top 3 Companies: ETR, RIG, AINV

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."

Entergy

Dividend Yield: 4.30%

Entergy (NYSE: ETR) shares currently have a dividend yield of 4.30%.

Entergy Corporation, together with its subsidiaries, is engaged in the electric power production and retail electric distribution operations in the United States. It generates electricity through gas/oil, nuclear, coal, and hydro power. The company has a P/E ratio of 14.51.

The average volume for Entergy has been 1,795,500 shares per day over the past 30 days. Entergy has a market cap of $14.0 billion and is part of the utilities industry. Shares are up 20.1% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Entergy as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations, 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 generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.4%. Since the same quarter one year prior, revenues rose by 23.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 35.35% is the gross profit margin for ENTERGY CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 12.65% is above that of the industry average.
  • Net operating cash flow has increased to $767.16 million or 41.02% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 18.73%.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electric Utilities industry. The net income increased by 143.2% when compared to the same quarter one year prior, rising from $166.98 million to $406.05 million.
  • 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.

Transocean

Dividend Yield: 6.70%

Transocean (NYSE: RIG) shares currently have a dividend yield of 6.70%.

Transocean Ltd., together with its subsidiaries, provides offshore contract drilling services for oil and gas wells worldwide. The company provides deepwater and harsh environment drilling, oil and gas drilling management, and drilling engineering and drilling project management services. The company has a P/E ratio of 10.16.

The average volume for Transocean has been 4,371,900 shares per day over the past 30 days. Transocean has a market cap of $16.1 billion and is part of the energy industry. Shares are down 11.7% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates Transocean as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, attractive valuation levels 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:
  • TRANSOCEAN LTD has improved earnings per share by 42.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TRANSOCEAN LTD increased its bottom line by earning $3.87 versus $2.24 in the prior year. This year, the market expects an improvement in earnings ($4.21 versus $3.87).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 42.0% when compared to the same quarter one year prior, rising from $321.00 million to $456.00 million.
  • RIG's revenue growth trails the industry average of 20.5%. Since the same quarter one year prior, revenues slightly increased by 7.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 45.75% is the gross profit margin for TRANSOCEAN LTD which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.49% is above that of 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.

Apollo Investment

Dividend Yield: 9.20%

Apollo Investment (NASDAQ: AINV) shares currently have a dividend yield of 9.20%.

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 7.39.

The average volume for Apollo Investment has been 3,095,800 shares per day over the past 30 days. Apollo Investment has a market cap of $2.1 billion and is part of the financial services industry. Shares are up 2.5% 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, increase in net income, expanding profit margins, 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 0.1%. 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 S&P 500 and the Capital Markets industry average. 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.

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