3 Buy-Rated Dividend Stocks Taking The Lead: WMB, MO, SIX

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."

Williams Companies

Dividend Yield: 4.90%

Williams Companies (NYSE: WMB) shares currently have a dividend yield of 4.90%.

The Williams Companies, Inc. operates as an energy infrastructure company primarily in the United States. The company operates in three segments: Williams Partners, Access Midstream, and Williams NGL & Petchem Services. The company has a P/E ratio of 70.20.

The average volume for Williams Companies has been 6,371,300 shares per day over the past 30 days. Williams Companies has a market cap of $36.3 billion and is part of the energy industry. Shares are up 7.2% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Williams Companies as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins, notable return on equity and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 50.00% to $669.00 million when compared to the same quarter last year. In addition, WILLIAMS COS INC has also vastly surpassed the industry average cash flow growth rate of -53.19%.
  • The gross profit margin for WILLIAMS COS INC is rather high; currently it is at 50.52%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 4.07% trails the industry average.
  • 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. In comparison to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, WILLIAMS COS INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • Despite the weak revenue results, WMB has significantly outperformed against the industry average of 38.5%. Since the same quarter one year prior, revenues slightly dropped by 1.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • In its most recent trading session, WMB 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. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.

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