Buy-Rated Dividend Stocks: Top 3 Companies: BCE, AVA, UVV

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."

BCE

Dividend Yield: 4.90%

BCE (NYSE: BCE) shares currently have a dividend yield of 4.90%.

BCE Inc., a telecommunications and media company, provides wireless, wireline, Internet, and television (TV) services to residential, business, and wholesale customers in Canada. The company operates through Bell Wireless, Bell Wireline, and Bell Media segments. The company has a P/E ratio of 19.74.

The average volume for BCE has been 928,000 shares per day over the past 30 days. BCE has a market cap of $36.9 billion and is part of the telecommunications industry. Shares are down 4.3% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates BCE as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • BCE's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 2.8%. 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.
  • 48.55% is the gross profit margin for BCE INC which we consider to be strong. 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 10.87% trails the industry average.
  • Net operating cash flow has slightly increased to $1,045.00 million or 6.41% when compared to the same quarter last year. Despite an increase in cash flow, BCE INC's average is still marginally south of the industry average growth rate of 8.75%.
  • 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 on the basis of return on equity, BCE INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • BCE INC's earnings per share declined by 20.3% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, BCE INC increased its bottom line by earning $2.97 versus $2.54 in the prior year.

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Avista

Dividend Yield: 4.10%

Avista (NYSE: AVA) shares currently have a dividend yield of 4.10%.

Avista Corporation, an electric and natural gas utility company, generates, transmits, and distributes electricity; and distributes natural gas in the United States and Canada. It operates in two segments, Avista Utilities and Alaska Electric Light and Power Company. The company has a P/E ratio of 17.13.

The average volume for Avista has been 354,400 shares per day over the past 30 days. Avista has a market cap of $2.0 billion and is part of the utilities industry. Shares are down 8.9% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Avista as a buy. The company's strengths can be seen in multiple areas, such as its attractive valuation levels and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • AVISTA CORP's earnings per share declined by 5.1% 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, AVISTA CORP increased its bottom line by earning $1.94 versus $1.72 in the prior year. This year, the market expects an improvement in earnings ($1.97 versus $1.94).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.4%. Since the same quarter one year prior, revenues slightly dropped by 0.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • In its most recent trading session, AVA 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.
  • The gross profit margin for AVISTA CORP is currently lower than what is desirable, coming in at 27.78%. Regardless of AVA'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 10.40% trails the industry average.

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Universal

Dividend Yield: 4.10%

Universal (NYSE: UVV) shares currently have a dividend yield of 4.10%.

Universal Corporation operates as a leaf tobacco merchant and processor worldwide. It is engaged in procuring, financing, processing, packing, storing, and shipping leaf tobacco for sale to, or for the account of, manufacturers of consumer tobacco products. The company has a P/E ratio of 12.62.

The average volume for Universal has been 220,700 shares per day over the past 30 days. Universal has a market cap of $1.2 billion and is part of the tobacco industry. Shares are up 17.6% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Universal 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, attractive valuation levels, good cash flow from operations and increase in net income. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 23.2%. Since the same quarter one year prior, revenues rose by 12.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 2.52, which clearly demonstrates the ability to cover short-term cash needs.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Tobacco industry. The net income increased by 71.8% when compared to the same quarter one year prior, rising from $26.67 million to $45.83 million.
  • Net operating cash flow has significantly increased by 2042.37% to $228.12 million when compared to the same quarter last year. In addition, UNIVERSAL CORP/VA has also vastly surpassed the industry average cash flow growth rate of -31.03%.

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