Best 3 Yielding Buy-Rated Stocks: SO, CNSL, MCC

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."

Southern

Dividend Yield: 4.80%

Southern (NYSE: SO) shares currently have a dividend yield of 4.80%.

The Southern Company, together with its subsidiaries, operates as a public electric utility company. The company has a P/E ratio of 17.59.

The average volume for Southern has been 4,371,600 shares per day over the past 30 days. Southern has a market cap of $39.6 billion and is part of the utilities industry. Shares are up 8.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Southern as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, notable return on equity, increase in stock price during the past year and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • 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 100.6% when compared to the same quarter one year prior, rising from $313.00 million to $628.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.5%. Since the same quarter one year prior, revenues slightly increased by 5.2%. Growth in the company's revenue appears to have helped boost the 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, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • SOUTHERN CO reported significant earnings per share improvement 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, SOUTHERN CO reported lower earnings of $1.87 versus $2.67 in the prior year. This year, the market expects an improvement in earnings ($2.79 versus $1.87).
  • 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 Electric Utilities industry and the overall market on the basis of return on equity, SOUTHERN CO 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.

Consolidated Communications

Dividend Yield: 6.40%

Consolidated Communications (NASDAQ: CNSL) shares currently have a dividend yield of 6.40%.

Consolidated Communications Holdings, Inc., together with its subsidiaries, provides a range of communications services to residential and business clients in Illinois, Texas, Pennsylvania, California, Kansas, and Missouri. The company has a P/E ratio of 31.13.

The average volume for Consolidated Communications has been 373,100 shares per day over the past 30 days. Consolidated Communications has a market cap of $978.2 million and is part of the telecommunications industry. Shares are up 24% year-to-date as of the close of trading on Friday.

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 Consolidated Communications as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, growth in earnings per share, increase in net income, notable return on equity and solid stock price performance. 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:
  • Net operating cash flow has increased to $38.65 million or 37.75% when compared to the same quarter last year. In addition, CONSOLIDATED COMM HLDGS INC has also vastly surpassed the industry average cash flow growth rate of -21.96%.
  • CONSOLIDATED COMM HLDGS INC's earnings per share improvement from the most recent quarter was slightly positive. 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, CONSOLIDATED COMM HLDGS INC increased its bottom line by earning $0.74 versus $0.15 in the prior year. This year, the market expects an improvement in earnings ($0.96 versus $0.74).
  • 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 Diversified Telecommunication Services industry average. The net income increased by 6.7% when compared to the same quarter one year prior, going from $9.19 million to $9.81 million.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 44.95% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp 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 other strengths this company displays justify these higher price levels.
  • 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 Diversified Telecommunication Services industry and the overall market on the basis of return on equity, CONSOLIDATED COMM HLDGS INC has underperformed in comparison with the industry average, but has exceeded 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.

Medley Capital

Dividend Yield: 11.60%

Medley Capital (NYSE: MCC) shares currently have a dividend yield of 11.60%.

Medley Capital Corporation is a business development company. The fund seeks to invest in privately negotiated debt and equity securities of small and middle market companies. The company has a P/E ratio of 8.97.

The average volume for Medley Capital has been 773,100 shares per day over the past 30 days. Medley Capital has a market cap of $666.1 million and is part of the financial services industry. Shares are down 7.9% year-to-date as of the close of trading on Friday.

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 Medley Capital as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share, compelling growth in net income, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • MCC's very impressive revenue growth greatly exceeded the industry average of 3.0%. Since the same quarter one year prior, revenues leaped by 61.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • MEDLEY CAPITAL CORP reported significant earnings per share improvement 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, MEDLEY CAPITAL CORP increased its bottom line by earning $1.32 versus $1.24 in the prior year. This year, the market expects an improvement in earnings ($1.59 versus $1.32).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 425.5% when compared to the same quarter one year prior, rising from $3.16 million to $16.59 million.
  • The gross profit margin for MEDLEY CAPITAL CORP is rather high; currently it is at 68.40%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 43.57% significantly outperformed against the industry average.
  • Net operating cash flow has increased to -$64.69 million or 41.32% when compared to the same quarter last year. In addition, MEDLEY CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -89.01%.

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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