Best Of The Buy-Rated Dividend Stocks: Top 3 Companies: RIG, MIC, BBEP

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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 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."

Transocean

Dividend Yield: 6.70%

Transocean (NYSE: RIG) shares currently have a dividend yield of 6.70%.

Transocean Ltd., together with its subsidiaries, provides offshore contract drilling services for oil and gas wells worldwide. The company provides deepwater and harsh environment drilling, oil and gas drilling management, and drilling engineering and drilling project management services. The company has a P/E ratio of 10.57.

The average volume for Transocean has been 4,637,100 shares per day over the past 30 days. Transocean has a market cap of $16.3 billion and is part of the energy industry. Shares are down 9.5% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Transocean as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, revenue growth, attractive valuation levels, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • TRANSOCEAN LTD has improved earnings per share by 42.7% 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, TRANSOCEAN LTD increased its bottom line by earning $3.87 versus $2.24 in the prior year. This year, the market expects an improvement in earnings ($4.25 versus $3.87).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 11.2%. Since the same quarter one year prior, revenues slightly increased by 7.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 45.75% is the gross profit margin for TRANSOCEAN LTD which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.49% is above that of the industry average.
  • Net operating cash flow has increased to $136.00 million or 28.30% when compared to the same quarter last year. Despite an increase in cash flow, TRANSOCEAN LTD's cash flow growth rate is still lower than the industry average growth rate of 49.49%.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Macquarie Infrastructure

Dividend Yield: 6.20%

Macquarie Infrastructure (NYSE: MIC) shares currently have a dividend yield of 6.20%.

Macquarie Infrastructure Company LLC, through its subsidiaries, owns, operates, and invests in infrastructure businesses that provide services to businesses and individuals primarily in the United States. The company has a P/E ratio of 70.60.

The average volume for Macquarie Infrastructure has been 206,800 shares per day over the past 30 days. Macquarie Infrastructure has a market cap of $3.4 billion and is part of the transportation industry. Shares are up 10.9% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Macquarie Infrastructure as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, good cash flow from operations and expanding profit margins. 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:
  • MACQUARIE INFRASTRUCT CO LLC 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, MACQUARIE INFRASTRUCT CO LLC increased its bottom line by earning $0.60 versus $0.29 in the prior year. This year, the market expects an improvement in earnings ($1.24 versus $0.60).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Transportation Infrastructure industry. The net income increased by 246.9% when compared to the same quarter one year prior, rising from $5.87 million to $20.37 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.4%. Since the same quarter one year prior, revenues slightly increased by 4.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has significantly increased by 75.46% to $59.08 million when compared to the same quarter last year. In addition, MACQUARIE INFRASTRUCT CO LLC has also vastly surpassed the industry average cash flow growth rate of -5.36%.
  • 41.53% is the gross profit margin for MACQUARIE INFRASTRUCT CO LLC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, MIC's net profit margin of 7.37% significantly trails the industry average.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

BreitBurn Energy Partners

Dividend Yield: 9.00%

BreitBurn Energy Partners (NASDAQ: BBEP) shares currently have a dividend yield of 9.00%.

BreitBurn Energy Partners L.P., an independent oil and gas company, acquires, explores, and develops oil, natural gas liquids (NGLs), and gas properties in the United States.

The average volume for BreitBurn Energy Partners has been 555,300 shares per day over the past 30 days. BreitBurn Energy Partners has a market cap of $2.6 billion and is part of the energy industry. Shares are up 8.3% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates BreitBurn Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. 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:
  • BBEP's very impressive revenue growth greatly exceeded the industry average of 3.1%. Since the same quarter one year prior, revenues leaped by 90.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
  • BREITBURN ENERGY 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 year. We feel that this trend should continue. During the past fiscal year, BREITBURN ENERGY PARTNERS LP continued to lose money by earning -$0.40 versus -$0.60 in the prior year. This year, the market expects an improvement in earnings ($0.66 versus -$0.40).
  • 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 73.1% when compared to the same quarter one year prior, rising from -$36.30 million to -$9.76 million.
  • Net operating cash flow has significantly increased by 97.63% to $116.31 million when compared to the same quarter last year. In addition, BREITBURN ENERGY PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of 17.38%.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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