3 Buy-Rated Dividend Stocks To Check Out: PEG, ALE, GEL

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."

Public Service Enterprise Group

Dividend Yield: 4.10%

Public Service Enterprise Group (NYSE: PEG) shares currently have a dividend yield of 4.10%.

Public Service Enterprise Group Incorporated, through its subsidiaries, operates as an energy company primarily in the Northeastern and Mid Atlantic United States. The company has a P/E ratio of 15.53.

The average volume for Public Service Enterprise Group has been 3,249,300 shares per day over the past 30 days. Public Service Enterprise Group has a market cap of $18.4 billion and is part of the utilities industry. Shares are up 15% year-to-date as of the close of trading on Wednesday.

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

TheStreet Ratings rates Public Service Enterprise Group as a buy. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures 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:
  • 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.76, 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 PEG's debt-to-equity ratio is low, the quick ratio, which is currently 0.54, displays a potential problem in covering short-term cash needs.
  • PUBLIC SERVICE ENTRP GRP INC's earnings per share declined by 36.4% 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 year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, PUBLIC SERVICE ENTRP GRP INC reported lower earnings of $2.45 versus $2.51 in the prior year. This year, the market expects an improvement in earnings ($2.73 versus $2.45).
  • PEG, with its decline in revenue, slightly underperformed the industry average of 7.1%. Since the same quarter one year prior, revenues slightly dropped by 2.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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

ALLETE

Dividend Yield: 4.10%

ALLETE (NYSE: ALE) shares currently have a dividend yield of 4.10%.

ALLETE, Inc., together with its subsidiaries, generates, transmits, and distributes electricity in the United States. It operates through Regulated Operations, and Investments and Other segments. The company generates electricity from coal, hydel, wind, and biomass. The company has a P/E ratio of 18.13.

The average volume for ALLETE has been 207,300 shares per day over the past 30 days. ALLETE has a market cap of $2.0 billion and is part of the utilities industry. Shares are down 3% year-to-date as of the close of trading on Wednesday.

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

TheStreet Ratings rates ALLETE as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels 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:
  • ALE's revenue growth has slightly outpaced the industry average of 5.3%. Since the same quarter one year prior, revenues rose by 10.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ALLETE INC has improved earnings per share by 14.3% 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 year. We feel that this trend should continue. During the past fiscal year, ALLETE INC increased its bottom line by earning $2.63 versus $2.58 in the prior year. This year, the market expects an improvement in earnings ($2.88 versus $2.63).
  • The debt-to-equity ratio is somewhat low, currently at 0.94, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.78 is somewhat weak and could be cause for future problems.
  • In its most recent trading session, ALE 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.

Genesis Energy

Dividend Yield: 4.10%

Genesis Energy (NYSE: GEL) shares currently have a dividend yield of 4.10%.

Genesis Energy, L.P. operates in the midstream segment of the oil and gas industry in the Gulf Coast region of the United States. The company operates in three segments: Pipeline Transportation, Refinery Services, and Supply and Logistics. The company has a P/E ratio of 57.18.

The average volume for Genesis Energy has been 247,900 shares per day over the past 30 days. Genesis Energy has a market cap of $4.9 billion and is part of the energy industry. Shares are up 4.9% year-to-date as of the close of trading on Wednesday.

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

TheStreet Ratings rates Genesis Energy as a buy. Among the primary strengths of the company is its solid stock performance, considering both the consistency and magnitude of the price movement over time. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • GENESIS ENERGY -LP's earnings per share declined by 25.0% 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 year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, GENESIS ENERGY -LP reported lower earnings of $1.00 versus $1.23 in the prior year. This year, the market expects an improvement in earnings ($1.46 versus $1.00).
  • GEL, with its decline in revenue, slightly underperformed the industry average of 2.4%. Since the same quarter one year prior, revenues slightly dropped by 5.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • 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. 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.
  • The gross profit margin for GENESIS ENERGY -LP is currently extremely low, coming in at 6.45%. Regardless of GEL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.08% trails the industry average.
  • Net operating cash flow has significantly decreased to -$0.89 million or 101.56% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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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