What To Buy: Top 3 Buy-Rated Dividend Stocks: CPLP, CCLP, CODI

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."

Capital Product Partners

Dividend Yield: 11.00%

Capital Product Partners (NASDAQ: CPLP) shares currently have a dividend yield of 11.00%.

Capital Product Partners L.P., a shipping company, provides marine transportation services in Greece. The company has a P/E ratio of 26.72.

The average volume for Capital Product Partners has been 633,700 shares per day over the past 30 days. Capital Product Partners has a market cap of $889.9 million and is part of the transportation industry. Shares are up 6.9% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Capital Product Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in net income, expanding profit margins and growth in earnings per share. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 38.6%. Since the same quarter one year prior, revenues slightly increased by 3.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.69, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, CPLP has a quick ratio of 2.27, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 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 8.1% when compared to the same quarter one year prior, going from $11.24 million to $12.15 million.
  • The gross profit margin for CAPITAL PRODUCT PARTNERS LP is rather high; currently it is at 65.43%. Regardless of CPLP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CPLP's net profit margin of 24.85% significantly outperformed against the industry.
  • CAPITAL PRODUCT PARTNERS LP has improved earnings per share by 12.5% 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, CAPITAL PRODUCT PARTNERS LP reported lower earnings of $0.31 versus $0.99 in the prior year. This year, the market expects an improvement in earnings ($0.43 versus $0.31).

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CSI Compressco

Dividend Yield: 10.20%

CSI Compressco (NASDAQ: CCLP) shares currently have a dividend yield of 10.20%.

CSI Compressco LP provides compression services and equipment for natural gas and oil production, gathering, transportation, processing, and storage applications in the United States, Latin America, Canada, and internationally. The company has a P/E ratio of 88.41.

The average volume for CSI Compressco has been 136,800 shares per day over the past 30 days. CSI Compressco has a market cap of $644.8 million and is part of the energy industry. Shares are up 48.1% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates CSI Compressco as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • CCLP's very impressive revenue growth greatly exceeded the industry average of 1.7%. Since the same quarter one year prior, revenues leaped by 245.1%. 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 significantly increased by 100.08% to $32.48 million when compared to the same quarter last year. In addition, CSI COMPRESSCO LP has also vastly surpassed the industry average cash flow growth rate of 12.41%.
  • 41.58% is the gross profit margin for CSI COMPRESSCO LP which we consider to be strong. Regardless of CCLP'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 1.75% trails the industry average.
  • The debt-to-equity ratio of 1.03 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, CCLP has a quick ratio of 0.61, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Energy Equipment & Services industry and the overall market, CSI COMPRESSCO LP's return on equity significantly trails that of both the industry average and the S&P 500.

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Compass Diversified Holdings

Dividend Yield: 8.60%

Compass Diversified Holdings (NYSE: CODI) shares currently have a dividend yield of 8.60%.

Compass Diversified Holdings is a private equity firm specializing in acquisitions, buyouts, and middle market investments. It seeks to invest in manufacturing, distribution, consumer products, and business services sectors. The firm prefers to invest in companies based in North America. The company has a P/E ratio of 3.45.

The average volume for Compass Diversified Holdings has been 149,400 shares per day over the past 30 days. Compass Diversified Holdings has a market cap of $905.2 million and is part of the conglomerates industry. Shares are up 2.6% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Compass Diversified Holdings as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, reasonable valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.0%. Since the same quarter one year prior, revenues slightly increased by 4.6%. 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 company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Financial Services industry and the overall market, COMPASS DIVERSIFIED HOLDINGS's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 154.42% to $3.29 million when compared to the same quarter last year. In addition, COMPASS DIVERSIFIED HOLDINGS has also vastly surpassed the industry average cash flow growth rate of 20.99%.
  • CODI's debt-to-equity ratio of 0.70 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 1.40 is sturdy.

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