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." Dorchester Minerals L.P (NASDAQ: DMLP) shares currently have a dividend yield of 7.30%. Dorchester Minerals, L.P. is engaged in the acquisition, ownership, and administration of producing and nonproducing crude oil and natural gas royalty, net profits, and leasehold interests in the United States. The company has a P/E ratio of 18.78. The average volume for Dorchester Minerals L.P has been 43,200 shares per day over the past 30 days. Dorchester Minerals L.P has a market cap of $792.3 million and is part of the financial services industry. Shares are down 0.6% 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 largely solid financial position with reasonable debt levels by most measures, notable return on equity, good cash flow from operations, expanding profit margins and increase in stock price during the past year. 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:
- 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 29.68, which clearly demonstrates the ability to cover short-term cash needs.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, DORCHESTER MINERALS -LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has increased to $13.89 million or 12.12% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -23.15%.
- The gross profit margin for DORCHESTER MINERALS -LP is currently very high, coming in at 92.94%. Regardless of DMLP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DMLP's net profit margin of 69.53% significantly outperformed against the industry.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full Dorchester Minerals L.P Ratings Report.
- Powered by its strong earnings growth of 29.03% and other important driving factors, this stock has surged by 26.21% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GSJK should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- COMPRESSCO PARTNERS LP has improved earnings per share by 29.0% 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, COMPRESSCO PARTNERS LP increased its bottom line by earning $1.11 versus $1.04 in the prior year. This year, the market expects an improvement in earnings ($1.21 versus $1.11).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Energy Equipment & Services industry average. The net income increased by 29.6% when compared to the same quarter one year prior, rising from $4.90 million to $6.35 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.2%. Since the same quarter one year prior, revenues slightly increased by 0.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 46.35% is the gross profit margin for COMPRESSCO 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 19.56% is above that of the industry average.
- You can view the full Compressco Partners Ratings Report.
- LRE's revenue growth has slightly outpaced the industry average of 7.9%. Since the same quarter one year prior, revenues slightly increased by 1.4%. 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 slightly increased to $17.83 million or 1.16% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -23.15%.
- LRR ENERGY LP has experienced 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, LRR ENERGY LP reported poor results of -$1.90 versus $0.00 in the prior year. This year, the market expects an improvement in earnings ($1.07 versus -$1.90).
- In its most recent trading session, LRE 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.
- The debt-to-equity ratio of 1.30 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, LRE has managed to keep a strong quick ratio of 1.68, which demonstrates the ability to cover short-term cash needs.
- You can view the full LRR Energy Ratings Report.
- Our dividend calendar.