3 Buy-Rated Dividend Stocks To Check Out: BKEP, AHGP, NMFC

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

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."

Blueknight Energy Partners

Dividend Yield: 7.20%

Blueknight Energy Partners (NASDAQ: BKEP) shares currently have a dividend yield of 7.20%.

Blueknight Energy Partners, L.P. provides integrated terminalling, storage, processing, gathering, and transportation services for companies engaged in the production, distribution, and marketing of crude oil and asphalt products in the United States. The company has a P/E ratio of 129.83.

The average volume for Blueknight Energy Partners has been 60,900 shares per day over the past 30 days. Blueknight Energy Partners has a market cap of $256.4 million and is part of the energy industry. Shares are up 17.1% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Blueknight Energy Partners as a buy. Among the primary strengths of the company is its expanding profit margins over time. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • 39.23% is the gross profit margin for BLUEKNIGHT ENERGY PRTNRS 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 3.72% trails the industry average.
  • Despite the weak revenue results, BKEP has outperformed against the industry average of 38.5%. Since the same quarter one year prior, revenues slightly dropped by 8.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • BLUEKNIGHT ENERGY PRTNRS 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. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, BLUEKNIGHT ENERGY PRTNRS LP reported lower earnings of $0.15 versus $0.24 in the prior year. This year, the market expects earnings to be in line with last year ($0.15 versus $0.15).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 59.4% when compared to the same quarter one year ago, falling from $3.89 million to $1.58 million.
  • The share price of BLUEKNIGHT ENERGY PRTNRS LP has not done very well: it is down 11.33% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Despite the decline in its share price over the last year, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry. We feel, however, that other strengths this company displays compensate for this.

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Alliance Holdings GP

Dividend Yield: 7.70%

Alliance Holdings GP (NASDAQ: AHGP) shares currently have a dividend yield of 7.70%.

Alliance Holdings GP, L.P., through its subsidiaries, produces and markets coal primarily to utilities and industrial users in the United States. It produces a range of steam coal with varying sulfur and heat contents. The company has a P/E ratio of 10.28.

The average volume for Alliance Holdings GP has been 74,400 shares per day over the past 30 days. Alliance Holdings GP has a market cap of $2.9 billion and is part of the metals & mining industry. Shares are down 20.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Alliance Holdings GP as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, attractive valuation levels, good cash flow from operations and expanding profit margins. We feel its 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:
  • The revenue growth greatly exceeded the industry average of 38.5%. Since the same quarter one year prior, revenues slightly increased by 3.4%. 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.
  • 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ALLIANCE HOLDINGS GP 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 $161.06 million or 15.42% when compared to the same quarter last year. In addition, ALLIANCE HOLDINGS GP LP has also vastly surpassed the industry average cash flow growth rate of -53.34%.
  • 38.99% is the gross profit margin for ALLIANCE HOLDINGS GP LP which we consider to be strong. Regardless of AHGP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AHGP's net profit margin of 11.69% compares favorably to the industry average.

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New Mountain Finance

Dividend Yield: 9.00%

New Mountain Finance (NYSE: NMFC) shares currently have a dividend yield of 9.00%.

New Mountain Finance Corporation is a Business Development Company specializing in investments in middle market companies and debt securities at various levels of the capital structure, including first and second lien debt, unsecured notes, bonds, and mezzanine securities. The company has a P/E ratio of 10.46.

The average volume for New Mountain Finance has been 276,300 shares per day over the past 30 days. New Mountain Finance has a market cap of $874.6 million and is part of the financial services industry. Shares are up 0.8% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates New Mountain Finance as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, good cash flow from operations and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 5.6%. Since the same quarter one year prior, revenues rose by 20.0%. 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.
  • The gross profit margin for NEW MOUNTAIN FINANCE CORP is rather high; currently it is at 67.57%. It has increased significantly from the same period last year. Along with this, the net profit margin of 62.71% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 166.27% to $24.27 million when compared to the same quarter last year. Despite an increase in cash flow, NEW MOUNTAIN FINANCE CORP's cash flow growth rate is still lower than the industry average growth rate of 190.66%.
  • NEW MOUNTAIN FINANCE CORP's earnings per share declined by 26.0% in the most recent quarter compared to 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, NEW MOUNTAIN FINANCE CORP reported lower earnings of $0.87 versus $1.79 in the prior year. This year, the market expects an improvement in earnings ($1.37 versus $0.87).
  • 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. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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