3 Dividend Stocks To Buy, 3 To Avoid Now

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Includes: APU, ARLP, DUK, ETR, T, VZ
by: Dividend Kings

In recent months, the stock market has been extremely volatile. The high volatility has pushed in investors towards safe investments with high dividend yields. This article will examine companies that offer consistent earnings and strong dividend yields. In this article, I will examine these companies on a dividend evaluation basis to determine if they could be beneficial to your portfolio right now.

Alliance Resources Partners LP (NASDAQ:ARLP) has a market cap of $2.7 billion with a price to earnings ratio of 9.15. The stock has traded in a 52 week range between $58.00 and $84.10. The stock is currently trading around $73. The company reported third quarter revenues of $487 million compared to revenues of $410 million in the third quarter of 2010. Third quarter net income was $104 million compared to net income of $73 in the third quarter of 2010.

One of ARLP’s competitors is the Peabody Energy Corporation (NYSE:BTU). BTU is currently trading around $37 with a market cap of $10.01 billion and a price to earnings ratio of 10.25. BTU pays a dividend which yields 0.9% versus ARLP whose dividend yields 5.2%.

ARLP is a limited partnership that produces and markets coal. ARLP has a long record of profitability and in 2010, it increased its year-over-year revenues by 33% and its net income by 67%. Year-over-year third quarter revenues were up by 18% and net income was up by 42%. ARLP has been an excellent dividend paying company. The company has paid quarterly dividends since 1999 and over the last five years it has raised the dividend 18 times by a total of 107%. The stock performance has also been excellent. The stock price is up by 15% over the last 52 weeks and 257% over the last three years. ARLP expects to continue increasing earnings because its customers have reduced inventories and need more coal to meet increasing demands for electricity. Investors are not appreciating ARLP’s growing earnings and dividends. Therefore, this stock has significant upside potential.

AmeriGas Partners LP (NYSE:APU) has a market cap of $2.5 billion with a price to earnings ratio of 19.03. The stock has traded in a 52 week range between $36.76 and $51.50. The stock is currently trading around $44. The company reported fourth quarter revenues for the period ending on September 30th, in the amount of $460 million compared to revenues of $381 million in the fourth quarter of 2010. Fourth quarter net income was $-45 million compared to net income of $75 million in the fourth quarter of 2010.

One of APU’s competitors is Ferrellgas Partners LP (NYSE:FGP). FGP is currently trading around $22 with a market cap of $1.64 billion and a negative price to earnings ratio. FGP pays a dividend which yields 9% versus APU whose dividend yields 6.7%.

APU is a distributor of propane gas. In recent quarters, APU has seen its earnings take a steep downward slide. In 2010, the company’s year-over-year net income was down by 19.5%. In the fourth quarter of 2011, net income was $-45 million which was down by $120 million from the fourth quarter of 2010 net income of $75 million. Predictably the stock price has been hurt, and it is down by 9.2% over the last 52 weeks. In spite of drop in the stock’s price APU’s valuations remain relatively high (price to earnings ratio 19.03/price to book ratio 7.46). On November 7th, CNBC stock analyst Jim Cramer advised investors to avoid propane stocks and said "No, I don't want propane. It is a terrible place to be. Too much price cutting, competitors taking contracts away..." I believe that APU’s stock price will continue downwards and that and that its investors capital losses will exceed their dividend income. I think the stock is a sell.

Entergy Corporation (NYSE:ETR) has a market cap of $12.7 billion with a price to earnings ratio of 9.11. The stock has traded in a 52 week range between $57.60 and $74.50. The stock is currently trading around $72. The company reported third quarter revenues of $3.39 billion compared to revenues of $3.33 billion in the third quarter of 2010. Third quarter net income was $633 million compared to net income of $498 million in the third quarter of 2010.

One of ETR’s competitors is the Southern Company (NYSE:SO). SO is currently trading around $44 with a market cap of $38.25 billion and a price to earnings ratio of 18.16. SO pays a dividend which yields 4.2% versus ETR whose dividend yields 4.6%.

ETR generates and distributes electricity. In 2010, the company increased its year-over-year revenues by 6.5% and its net income by 1.6%. The company increased its year-over-year third quarter revenues by 1.8% and net income by 27%. The company has paid quarterly dividends since 1982 and has increased its dividend two times by 53.7% over the last five years. The company’s stock performance has been flat. The stock is up by 3.3% over the last 52 weeks and .005% over the last three years. ETR’s stock offers some opportunity for capital appreciation, but more importantly it is a safe investment with a healthy dividend income.

Duke Energy Corporation (NYSE:DUK) has a market cap of $27.6 billion with a price to earnings ratio of 14.99. The stock has traded in a 52 week range between $16.87 and $21.02. The stock is currently trading near the top of its 52 week trading at around $21. The company reported third quarter revenues of $3.9 billion compared to revenues of $3.9 billion in the third quarter of 2010. Third quarter net income was $472 million compared to net income of $670 million in the third quarter of 2010.

One of DUK’s competitors is the American Electric Power Company (NYSE:AEP). AEP is currently trading around $40 with a market cap of $19.19 billion and a price to earnings ratio of 10.57. AEP pays a dividend that yields 4.7% versus DUK whose dividend yields 4.8%.

DUK transports and sells electricity and natural gas. In the third quarter, the company reported revenues of $3.9 billion which equaled its 2010 third quarter revenues. The company’s third quarter net income decreased by 42%. DUK’s earnings have been consistent, and the negative third quarter comparison was a one-time event. The company has paid quarterly dividends since 1983 and over the last four years it has increased its dividend four times by 19%. The dividend was increased to its current level of $1.00 in the third quarter of 2011. Investors like DUK’s consistent earnings and dividend flow and have bid up the stock price by 18.75% over the last 52 weeks. DUK offers investors capital appreciation and a healthy dividend income.

Verizon Communications Inc. (NYSE:VZ) has a market cap of $108.63 billion with a price to earnings ratio of 15.36. The stock has traded in a 52 week range between $32.28 and $38.95. The stock is currently trading near the top of its 52 week trading range at around $38. The company reported third quarter revenues of $28 billion compared to revenues of $26 billion in the third quarter of 2010. Third quarter net income was $1.3 billion compared to net income of $659 million in the third quarter of 2010.

One of VZ’s competitors is Century Link Inc. (NYSE:CTL). CTL is currently trading around $36 with a market cap of $22.2 billion and a price to earnings ratio of 23.76. CTL pays a dividend which yields 8% versus VZ whose dividend yields 5.2%.

VZ is a holding company whose subsidiaries provide wireless and wireline phone service, as well as internet and network access. The company’s earnings had been relatively flat, but in the third quarter, it increased revenues by 7.6% and net income by 97%. The stock price is up by 14% over the last 52 weeks and 33% over the last three years. The company has an excellent record of paying dividends. It has paid quarterly dividends since 1984 and has increased its dividend five times by 194% since 2008. VZ has recently announced that starting in May of 2012 it will offer an online video service that will compete with Netflix (NASDAQ:NFLX). I believe that VZ will continue to grow its earnings and pay a strong dividend and that the online video service could be a significant upside catalyst.

AT&T Inc. (NYSE:T) has a market cap of $171.41 billion with a price to earnings ratio of 14.69. The stock has traded in a 52 week range between $27.20 and $31.94. The stock is currently trading around $29. The company reported third quarter revenues of $31.4 billion compared to revenues of $31.5 billion in the third quarter of 2010. Third quarter net income was $3.6 billion compared to net income of $11.5 billion in the third quarter of 2010.

One of T’s competitors is the Sprint Nextel Corporation (NYSE:S). S is currently trading around $2.50 with a market cap of $7.5 billion and a negative price to earnings ratio. S does not pay a dividend versus T whose dividend is 5.9%.

T offers its customers wireless and wireline phone service as well as internet and cable access. The company has been profitable in nine out of the last ten years and has increased its net income in each of the last three quarters. The company has paid quarter dividends since 1984 and over the last five years it has increased its dividend five times by 30%.

The company’s stock performance has been poor. The stock price is up by 2% over the last 52 weeks and 16% over the last three years. In an effort to increase earnings T has tried to purchase Deutsche Telekom’s (OTCQX:DTEGF) T-Mobile unit but has been blocked by the FCC. T will continue to be a strong company even if it is unable to purchase T-Mobile, but I do not think that the stock will be able advance until the T-Mobil issue is settled.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.