Buy-Rated Dividend Stocks: Top 3 Companies: STNG, EEP, NGLS

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."

Scorpio Tankers

Dividend Yield: 4.20%

Scorpio Tankers (NYSE: STNG) shares currently have a dividend yield of 4.20%.

Scorpio Tankers Inc., together with its subsidiaries, is engaged in the seaborne transportation of refined petroleum products and crude oil worldwide. The company has a P/E ratio of 31.60.

The average volume for Scorpio Tankers has been 2,240,800 shares per day over the past 30 days. Scorpio Tankers has a market cap of $1.6 billion and is part of the conglomerates industry. Shares are down 19.4% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Scorpio Tankers as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 11.5%. 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 0.61, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 4.67, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has significantly increased by 344.09% to $13.33 million when compared to the same quarter last year. In addition, SCORPIO TANKERS INC has also vastly surpassed the industry average cash flow growth rate of -5.22%.
  • SCORPIO TANKERS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, SCORPIO TANKERS INC turned its bottom line around by earning $0.14 versus -$0.65 in the prior year. This year, the market expects an improvement in earnings ($0.16 versus $0.14).
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SCORPIO TANKERS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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Enbridge Energy Partners

Dividend Yield: 6.00%

Enbridge Energy Partners (NYSE: EEP) shares currently have a dividend yield of 6.00%.

Enbridge Energy Partners, L.P. owns and operates crude oil and liquid petroleum transportation and storage assets; and natural gas gathering, treating, processing, transportation, and marketing assets in the United States. It operates through three segments: Liquids, Natural Gas, and Marketing.

The average volume for Enbridge Energy Partners has been 835,600 shares per day over the past 30 days. Enbridge Energy Partners has a market cap of $9.4 billion and is part of the energy industry. Shares are up 24% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Enbridge Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance and revenue growth. 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 trading one year ago, EEP is up 24.58% to its most recent closing price of 36.79. Looking ahead, although the push and pull of a bull or bear market could certainly alter the outcome, our view is that this stock's positive fundamentals give it good potential for further appreciation.
  • The revenue growth came in higher than the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 11.9%. 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.
  • ENBRIDGE ENERGY PRTNRS -LP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, ENBRIDGE ENERGY PRTNRS -LP swung to a loss, reporting -$0.38 versus $1.25 in the prior year. This year, the market expects an improvement in earnings ($0.95 versus -$0.38).
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 33.4% when compared to the same quarter one year ago, falling from $105.30 million to $70.10 million.
  • The debt-to-equity ratio of 1.15 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.34, which clearly demonstrates the inability to cover short-term cash needs.

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

Targa Resources Partners

Dividend Yield: 4.30%

Targa Resources Partners (NYSE: NGLS) shares currently have a dividend yield of 4.30%.

Targa Resources Partners LP is engaged in the ownership, operation, acquisition, and development of midstream energy assets in the United States. The company operates through two divisions, Gathering and Processing, and Logistics and Marketing. The company has a P/E ratio of 30.00.

The average volume for Targa Resources Partners has been 385,600 shares per day over the past 30 days. Targa Resources Partners has a market cap of $8.4 billion and is part of the energy industry. Shares are up 41.1% year-to-date as of the close of trading on Monday.

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 Targa Resources Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, good cash flow from operations, 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:
  • The revenue growth greatly exceeded the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 43.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 313.7% when compared to the same quarter one year prior, rising from $26.30 million to $108.80 million.
  • Net operating cash flow has significantly increased by 2652.94% to $140.40 million when compared to the same quarter last year. In addition, TARGA RESOURCES PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -5.22%.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, TARGA RESOURCES PARTNERS LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Powered by its strong earnings growth of 6300.00% and other important driving factors, this stock has surged by 51.01% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.

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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