3 Buy-Rated Dividend Stocks: SCG, STO, 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."

SCANA

Dividend Yield: 4.20%

SCANA (NYSE: SCG) shares currently have a dividend yield of 4.20%.

SCANA Corporation, through its subsidiaries, is engaged in the generation, transmission, distribution, and sale of electricity to retail and wholesale customers in South Carolina. It owns nuclear, coal, hydro, natural gas and oil, and biomass generating facilities. The company has a P/E ratio of 13.55.

The average volume for SCANA has been 784,100 shares per day over the past 30 days. SCANA has a market cap of $7.2 billion and is part of the utilities industry. Shares are up 7.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates SCANA as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, reasonable valuation levels, notable return on equity and increase in net income. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • SCANA CORP has improved earnings per share by 13.3% 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, SCANA CORP increased its bottom line by earning $3.38 versus $3.14 in the prior year. This year, the market expects an improvement in earnings ($3.62 versus $3.38).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.2%. Since the same quarter one year prior, revenues slightly increased by 1.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 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, SCANA CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Multi-Utilities industry average. The net income increased by 11.6% when compared to the same quarter one year prior, going from $86.00 million to $96.00 million.

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