3 Buy-Rated Dividend Stocks: LGCY, CMLP, EXLP

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 3 stocks with substantial yields, that ultimately, we have rated "Buy."

Legacy Reserves

Dividend Yield: 8.70%

Legacy Reserves (NASDAQ: LGCY) shares currently have a dividend yield of 8.70%.

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 23.52.

The average volume for Legacy Reserves has been 247,700 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 11.7% year to date as of the close of trading on Thursday.

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 6.7%. 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 ($1.47 versus $1.43).
  • LGCY has underperformed the S&P 500 Index, declining 9.54% 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 85.17.

The average volume for Crestwood Midstream Partners has been 263,000 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 14.7% year to date as of the close of trading on Thursday.

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. The firm also exceeded the industry average cash flow growth rate of -23.86%.
  • 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, the net profit margin of 8.52% trails the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.7%. 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.
  • 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).

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.

Exterran Partners L.P

Dividend Yield: 7.10%

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 80.78.

The average volume for Exterran Partners L.P has been 234,000 shares per day over the past 30 days. Exterran Partners L.P has a market cap of $1.4 billion and is part of the energy industry. Shares are up 43.5% year to date as of the close of trading on Thursday.

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, expanding profit margins, impressive record of earnings per share growth, compelling growth in net income and solid stock price performance. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.1%. Since the same quarter one year prior, revenues rose by 19.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 43.80% 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. Along with this, the net profit margin of 13.89% is above that of the industry average.
  • EXTERRAN PARTNERS 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 two years. We feel that this trend should continue. 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 ($1.01 versus $0.14).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 227.0% when compared to the same quarter one year prior, rising from $4.51 million to $14.73 million.
  • Powered by its strong earnings growth of 244.44% and other important driving factors, this stock has surged by 35.04% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.

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.

Other helpful dividend tools from TheStreet:

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.
null

If you liked this article you might like

Strong On High Volume: Legacy Reserves (LGCY)

Strong On High Volume: Legacy Reserves (LGCY)

What To Sell: 3 Sell-Rated Dividend Stocks JPEP, LGCY, NRP

What To Sell: 3 Sell-Rated Dividend Stocks JPEP, LGCY, NRP

3 Sell-Rated Dividend Stocks: DLNG, LGCY, JCS

3 Sell-Rated Dividend Stocks: DLNG, LGCY, JCS

What To Sell: 3 Sell-Rated Dividend Stocks IRT, LGCY, CELP

What To Sell: 3 Sell-Rated Dividend Stocks IRT, LGCY, CELP

3 Stocks Going Ex-Dividend Tomorrow: HMLP, LGCY, MATX

3 Stocks Going Ex-Dividend Tomorrow: HMLP, LGCY, MATX