4 Buy-Rated Dividend Stocks

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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 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."

Dorchester Minerals L.P

Dividend Yield: 7.50%

Dorchester Minerals L.P (NASDAQ: DMLP) shares currently have a dividend yield of 7.50%.

Dorchester Minerals, L.P. engages in the acquisition, ownership, and administration of producing and nonproducing crude oil and natural gas royalty, net profits, and leasehold interests in 574 counties and parishes in 25 states. The company owns royalty properties and net profits interests. The company has a P/E ratio of 19.17.

The average volume for Dorchester Minerals L.P has been 59,800 shares per day over the past 30 days. Dorchester Minerals L.P has a market cap of $705.5 million and is part of the financial services industry. Shares are up 13.1% year to date as of the close of trading on Friday.

TheStreet Ratings rates Dorchester Minerals L.P as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry average. The net income increased by 5.4% when compared to the same quarter one year prior, going from $13.20 million to $13.92 million.
  • DMLP has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 53.53, which clearly demonstrates the ability to cover short-term cash needs.
  • 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, DORCHESTER MINERALS -LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • The gross profit margin for DORCHESTER MINERALS -LP is currently very high, coming in at 94.40%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 68.81% significantly outperformed against the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 1.3%. Since the same quarter one year prior, revenues slightly dropped by 1.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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Legacy Reserves

Dividend Yield: 8.60%

Legacy Reserves (NASDAQ: LGCY) shares currently have a dividend yield of 8.60%.

Legacy Reserves LP, an independent oil and natural gas limited partnership, engages in the acquisition and development of oil and natural gas properties primarily located in the Permian Basin, Mid-Continent, and Rocky Mountain regions of the United States. The company has a P/E ratio of 19.02.

The average volume for Legacy Reserves has been 286,500 shares per day over the past 30 days. Legacy Reserves has a market cap of $1.5 billion and is part of the energy industry. Shares are up 11.9% year to date as of the close of trading on Friday.

TheStreet Ratings rates Legacy Reserves as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • LGCY's very impressive revenue growth greatly exceeded the industry average of 1.3%. Since the same quarter one year prior, revenues leaped by 264.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 103.2% when compared to the same quarter one year prior, rising from -$58.52 million to $1.87 million.
  • 46.10% is the gross profit margin for LEGACY RESERVES LP which we consider to be strong. 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 1.97% trails the industry average.
  • LEGACY RESERVES LP 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, LEGACY RESERVES LP reported lower earnings of $1.43 versus $1.71 in the prior year. This year, the market expects an improvement in earnings ($1.46 versus $1.43).
  • LGCY has underperformed the S&P 500 Index, declining 7.06% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

Crestwood Midstream Partners

Dividend Yield: 8.30%

Crestwood Midstream Partners (NYSE: CMLP) shares currently have a dividend yield of 8.30%.

Crestwood Midstream Partners LP primarily engages in the gathering, processing, treating, compressing, transporting, and selling natural gas in the United States. The company operates in four segments: Barnett, Fayetteville, Granite Wash, and Marcellus. The company has a P/E ratio of 66.30.

The average volume for Crestwood Midstream Partners has been 233,300 shares per day over the past 30 days. Crestwood Midstream Partners has a market cap of $1.0 billion and is part of the energy industry. Shares are up 16% year to date as of the close of trading on Friday.

TheStreet Ratings rates Crestwood Midstream Partners as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has slightly increased to $19.13 million or 7.06% when compared to the same quarter last year. Despite an increase in cash flow, CRESTWOOD MIDSTREAM PTNRS LP's cash flow growth rate is still lower than the industry average growth rate of 26.66%.
  • 48.30% is the gross profit margin for CRESTWOOD MIDSTREAM PTNRS LP which we consider to be strong. Regardless of CMLP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CMLP's net profit margin of 8.52% compares favorably to the industry average.
  • CRESTWOOD MIDSTREAM PTNRS LP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, CRESTWOOD MIDSTREAM PTNRS LP reported lower earnings of $0.37 versus $1.00 in the prior year. This year, the market expects an improvement in earnings ($0.48 versus $0.37).
  • CMLP, with its decline in revenue, slightly underperformed the industry average of 1.3%. Since the same quarter one year prior, revenues slightly dropped by 3.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • CMLP's debt-to-equity ratio of 0.91 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.10 is sturdy.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

Pioneer Southwest Energy Partners

Dividend Yield: 8.30%

Pioneer Southwest Energy Partners (NYSE: PSE) shares currently have a dividend yield of 8.30%.

Pioneer Southwest Energy Partners L.P. owns, acquires, explores, and develops oil and gas properties in the United States. It produces oil, natural gas liquids, and gas in onshore Texas and eight counties in the southeast region of New Mexico. The company has a P/E ratio of 8.39.

The average volume for Pioneer Southwest Energy Partners has been 158,100 shares per day over the past 30 days. Pioneer Southwest Energy Partners has a market cap of $899.3 million and is part of the energy industry. Shares are up 9.1% year to date as of the close of trading on Friday.

TheStreet Ratings rates Pioneer Southwest Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • 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 437.2% when compared to the same quarter one year prior, rising from -$6.88 million to $23.21 million.
  • The gross profit margin for PIONEER SOUTHWEST ENERGY -LP is rather high; currently it is at 62.00%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, PSE's net profit margin of 50.24% significantly outperformed against the industry.
  • PSE, with its decline in revenue, underperformed when compared the industry average of 1.3%. Since the same quarter one year prior, revenues fell by 14.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PIONEER SOUTHWEST ENERGY -LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • PIONEER SOUTHWEST ENERGY -LP 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PIONEER SOUTHWEST ENERGY -LP reported lower earnings of $3.00 versus $3.69 in the prior year. For the next year, the market is expecting a contraction of 27.5% in earnings ($2.18 versus $3.00).

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

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Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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