3 Buy-Rated Dividend Stocks Taking The Lead: TEP, GM, NPBC

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."

Tallgrass Energy Partners

Dividend Yield: 4.20%

Tallgrass Energy Partners (NYSE: TEP) shares currently have a dividend yield of 4.20%.

Tallgrass Energy Partners, LP acquires, owns, develops, and operates various midstream energy assets in North America. The company operates through three segments: Natural Gas Transportation & Logistics; Crude Oil Transportation & Logistics; and Processing & Logistics. The company has a P/E ratio of 32.48.

The average volume for Tallgrass Energy Partners has been 325,800 shares per day over the past 30 days. Tallgrass Energy Partners has a market cap of $3.0 billion and is part of the energy industry. Shares are up 12.9% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Tallgrass Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and good cash flow from operations. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 38.3%. Since the same quarter one year prior, revenues rose by 21.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • TALLGRASS ENERGY PRT LP has improved earnings per share by 46.3% 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, TALLGRASS ENERGY PRT LP increased its bottom line by earning $1.55 versus $0.24 in the prior year. This year, the market expects an improvement in earnings ($1.66 versus $1.55).
  • 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 88.7% when compared to the same quarter one year prior, rising from $17.12 million to $32.32 million.
  • 44.30% is the gross profit margin for TALLGRASS ENERGY PRT LP which we consider to be strong. It has increased significantly from the same period last year. Along with this, the net profit margin of 28.18% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 148.06% to $48.64 million when compared to the same quarter last year. In addition, TALLGRASS ENERGY PRT LP has also vastly surpassed the industry average cash flow growth rate of -53.10%.

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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 16.30.

The average volume for General Motors has been 14,709,100 shares per day over the past 30 days. General Motors has a market cap of $56.3 billion and is part of the automotive industry. Shares are up 0.6% year-to-date as of the close of trading on Tuesday.

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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 its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

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 6.6%. 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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National Penn

Dividend Yield: 4.10%

National Penn (NASDAQ: NPBC) shares currently have a dividend yield of 4.10%.

National Penn Bancshares, Inc. operates as the bank holding company for National Penn Bank that provides commercial banking products, primarily deposits and loans to residents and businesses primarily in eastern and central Pennsylvania. The company has a P/E ratio of 14.73.

The average volume for National Penn has been 936,700 shares per day over the past 30 days. National Penn has a market cap of $1.5 billion and is part of the banking industry. Shares are up 3.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates National Penn as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, good cash flow from operations and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:
  • NPBC's revenue growth has slightly outpaced the industry average of 0.8%. Since the same quarter one year prior, revenues slightly increased by 9.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • NATIONAL PENN BANCSHARES INC has improved earnings per share by 18.8% 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, NATIONAL PENN BANCSHARES INC increased its bottom line by earning $0.70 versus $0.37 in the prior year. This year, the market expects an improvement in earnings ($0.77 versus $0.70).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Commercial Banks industry average. The net income increased by 17.7% when compared to the same quarter one year prior, going from $22.71 million to $26.73 million.
  • Net operating cash flow has significantly increased by 56.63% to $16.63 million when compared to the same quarter last year. In addition, NATIONAL PENN BANCSHARES INC has also vastly surpassed the industry average cash flow growth rate of -30.59%.
  • The gross profit margin for NATIONAL PENN BANCSHARES INC is currently very high, coming in at 90.59%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 26.72% trails the industry average.

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