Buy-Rated Dividend Stocks In The Top 3: GM, FTR, APU

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

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."

General Motors

Dividend Yield: 4.10%

General Motors (NYSE: GM) shares currently have a dividend yield of 4.10%.

General Motors Company designs, builds, and sells cars, crossovers, trucks, and automobile parts worldwide. It operates through GM North America, GM Europe, GM International Operations, GM South America, and GM Financial segments. The company has a P/E ratio of 16.47.

The average volume for General Motors has been 16,328,300 shares per day over the past 30 days. General Motors has a market cap of $56.9 billion and is part of the automotive industry. Shares are up 1.5% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates General Motors as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, impressive record of earnings per share growth, notable return on equity and largely solid financial position with reasonable debt levels by most measures. 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 Automobiles industry. The net income increased by 343.7% when compared to the same quarter one year prior, rising from $213.00 million to $945.00 million.
  • GENERAL MOTORS 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, GENERAL MOTORS CO reported lower earnings of $1.64 versus $2.35 in the prior year. This year, the market expects an improvement in earnings ($4.48 versus $1.64).
  • 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 Automobiles industry and the overall market on the basis of return on equity, GENERAL MOTORS CO has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 12.3%. Since the same quarter one year prior, revenues slightly dropped by 4.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Even though the current debt-to-equity ratio is 1.33, it is still below the industry average, suggesting that this level of debt is acceptable within the Automobiles industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.79 is weak.

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Frontier Communications

Dividend Yield: 6.10%

Frontier Communications (NASDAQ: FTR) shares currently have a dividend yield of 6.10%.

Frontier Communications Corporation, a communications company, provides regulated and unregulated voice, data, and video services to residential, business, and wholesale customers in the United States. The company has a P/E ratio of 52.77.

The average volume for Frontier Communications has been 11,747,400 shares per day over the past 30 days. Frontier Communications has a market cap of $6.9 billion and is part of the telecommunications industry. Shares are up 2.9% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Frontier Communications as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.7%. Since the same quarter one year prior, revenues rose by 12.7%. 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.
  • FRONTIER COMMUNICATIONS CORP 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. Stable earnings per share over the past two years indicate the company has sound management over its earnings and share float. We anticipate the company beginning to experience more growth in the coming year. During the past fiscal year, FRONTIER COMMUNICATIONS CORP increased its bottom line by earning $0.13 versus $0.12 in the prior year. This year, the market expects an improvement in earnings ($0.18 versus $0.13).
  • 42.49% is the gross profit margin for FRONTIER COMMUNICATIONS CORP which we consider to be strong. Regardless of FTR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.04% trails the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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 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 Diversified Telecommunication Services industry and the overall market, FRONTIER COMMUNICATIONS CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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AmeriGas Partners

Dividend Yield: 7.60%

AmeriGas Partners (NYSE: APU) shares currently have a dividend yield of 7.60%.

AmeriGas Partners, L.P. operates as a retail and wholesale distributor of propane gas, and related equipment and supplies in the United States. The company has a P/E ratio of 40.95.

The average volume for AmeriGas Partners has been 208,700 shares per day over the past 30 days. AmeriGas Partners has a market cap of $4.5 billion and is part of the utilities industry. Shares are up 1.7% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates AmeriGas Partners as a buy. The company's strongest point has been its a solid financial position based on a variety of debt and liquidity measures that we have looked at. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • APU, with its decline in revenue, slightly underperformed the industry average of 10.5%. Since the same quarter one year prior, revenues fell by 15.0%. Weakness in the company's revenue seems to have hurt the 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.
  • AMERIGAS PARTNERS -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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, AMERIGAS PARTNERS -LP increased its bottom line by earning $1.80 versus $1.43 in the prior year. For the next year, the market is expecting a contraction of 28.8% in earnings ($1.28 versus $1.80).
  • 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 Gas Utilities industry. The net income has significantly decreased by 129.3% when compared to the same quarter one year ago, falling from $134.90 million to -$39.57 million.
  • The debt-to-equity ratio is very high at 2.13 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.48, which clearly demonstrates the inability to cover short-term cash needs.

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