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 and 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 4 stocks with substantial yields, that ultimately, we have rated "Buy." Exterran Partners L.P (NASDAQ: EXLP) shares currently have a dividend yield of 7.10%. Exterran Partners, L.P., together with its subsidiaries, provides natural gas contract operations services to customers in the United States. The company has a P/E ratio of 22.59. The average volume for Exterran Partners L.P has been 104,600 shares per day over the past 30 days. Exterran Partners L.P has a market cap of $1.5 billion and is part of the energy industry. Shares are down 1.6% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Exterran Partners L.P as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations, expanding profit margins, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- EXLP's revenue growth has slightly outpaced the industry average of 9.3%. Since the same quarter one year prior, revenues rose by 16.6%. 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.
- Net operating cash flow has increased to $49.07 million or 47.38% when compared to the same quarter last year. In addition, EXTERRAN PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -71.33%.
- 40.91% is the gross profit margin for EXTERRAN PARTNERS LP 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 8.66% trails the industry average.
- Compared to its closing price of one year ago, EXLP's share price has jumped by 27.98%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp 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 other strengths this company displays justify these higher price levels.
- EXTERRAN PARTNERS LP's earnings per share declined by 23.8% 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, EXTERRAN PARTNERS LP increased its bottom line by earning $0.14 versus $0.07 in the prior year. This year, the market expects an improvement in earnings ($1.28 versus $0.14).
- You can view the full Exterran Partners L.P Ratings Report.
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