Buy-Rated Dividend Stocks In The Top 3: NTI, ENI, PACW

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."

Northern Tier Energy

Dividend Yield: 17.60%

Northern Tier Energy (NYSE: NTI) shares currently have a dividend yield of 17.60%.

Northern Tier Energy LP, an independent downstream energy company, engages in refining, retail, and pipeline operations in the United States. It operates through two segments, Refining and Retail. The company has a P/E ratio of 8.08.

The average volume for Northern Tier Energy has been 465,500 shares per day over the past 30 days. Northern Tier Energy has a market cap of $2.3 billion and is part of the energy industry. Shares are up 11.3% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Northern Tier Energy as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, notable return on equity, attractive valuation levels 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:
  • NORTHERN TIER ENERGY LP 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 year. We feel that this trend should continue. During the past fiscal year, NORTHERN TIER ENERGY LP increased its bottom line by earning $2.60 versus $2.52 in the prior year. This year, the market expects an improvement in earnings ($3.99 versus $2.60).
  • 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 55.5% when compared to the same quarter one year prior, rising from $71.50 million to $111.20 million.
  • 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, NORTHERN TIER ENERGY LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is somewhat low, currently at 0.77, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.95 is somewhat weak and could be cause for future problems.

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Enersis

Dividend Yield: 5.40%

Enersis (NYSE: ENI) shares currently have a dividend yield of 5.40%.

Enersis S.A., an electric utility company, through its subsidiaries, engages in the generation, transmission, and distribution of electricity in Chile, Argentina, Brazil, Colombia, and Peru. It generates electricity from hydroelectric, thermal, and wind power plants. The company has a P/E ratio of 545.67.

The average volume for Enersis has been 842,700 shares per day over the past 30 days. Enersis has a market cap of $16.1 billion and is part of the utilities industry. Shares are up 2.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Enersis 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, growth in earnings per share and notable return on equity. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • ENI's revenue growth has slightly outpaced the industry average of 2.7%. Since the same quarter one year prior, revenues slightly increased by 4.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.58, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.12, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has significantly increased by 56.27% to $620.70 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 11.84%.
  • ENERSIS SA 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, ENERSIS SA reported lower earnings of $1.03 versus $1.67 in the prior year. This year, the market expects an improvement in earnings ($1.28 versus $1.03).
  • 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, ENERSIS SA has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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PacWest Bancorp

Dividend Yield: 4.30%

PacWest Bancorp (NASDAQ: PACW) shares currently have a dividend yield of 4.30%.

PacWest Bancorp operates as the holding company for Pacific Western Bank that provides commercial banking products and services to individuals, professionals, and small to mid-sized businesses in the United States. It accepts demand, money market, and time deposits. The company has a P/E ratio of 22.36.

The average volume for PacWest Bancorp has been 741,200 shares per day over the past 30 days. PacWest Bancorp has a market cap of $4.8 billion and is part of the banking industry. Shares are up 2.3% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates PacWest Bancorp 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, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • PACW's very impressive revenue growth greatly exceeded the industry average of 0.1%. Since the same quarter one year prior, revenues leaped by 157.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • PACWEST BANCORP has improved earnings per share by 24.6% 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, PACWEST BANCORP increased its bottom line by earning $1.97 versus $1.08 in the prior year. This year, the market expects an improvement in earnings ($2.80 versus $1.97).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Banks industry. The net income increased by 191.4% when compared to the same quarter one year prior, rising from $25.08 million to $73.08 million.
  • Net operating cash flow has significantly increased by 364.27% to $126.49 million when compared to the same quarter last year. In addition, PACWEST BANCORP has also vastly surpassed the industry average cash flow growth rate of -37.15%.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.

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