I'm a big fan of dividend stocks and try to ensure that I invest mainly in stocks that pay dividends. And while high yields are always nice to have, they do not mean everything. When looking at high-yield dividend stocks, I look for a variety of factors to help in determining whether or not I should consider the stock a buy. These factors include current financials of the company, current price and valuation, earnings, and dividend history. Based on these criteria, I feel that both Linn Energy (LINE) and Navios Maritime Partners (NYSE:NMM) are two high-yield dividend stocks worth considering as potential buys.
Linn Energy is an oil and natural gas company that focuses on the development, exploitation and acquisition of natural gas throughout various regions across the United States. Linn Energy was founded in 2003 and is headquartered in Houston, Texas.
|Gross Profit Margin (Quarterly)||76.15%|
|Profit Margin (Quarterly)||-124.70%|
|Return on Assets (TTM)||-5.56%|
|Return on Equity||-15.27%|
|Quarterly Revenue Growth (YOY)||10.15%|
Looking at the chart below, you can see that Linn Energy's revenue and profit have been up and down in recent years, but 2013 saw Linn headed in the right direction.
Current Price and Valuation
Linn Energy closed Monday at $29.38, which is $10.09 less than its 52-week high and $9.03 higher than its 52-week low. Linn Energy is trading below both its 200-day moving average of $29.60 and its 50-day moving average of $32.20.
This month, the stock has dropped 7.75%, creating a nice entry point for long-term investors, in my opinion. Linn Energy is trading at a P/S ratio of 3.00x and a price to book value of 1.65x.
Looking at the chart below, you can see that Linn Energy has struggled at creating any sustained momentum in terms of earnings growth, with values going up and down on a near quarterly basis.
LINE EPS Basic (TTM) data by YCharts
Linn Energy currently pays a monthly dividend of $0.2416 that yields just under 10%. Looking at the chart below, you can see that Linn Energy has consistently yielded a dividend above 5% over the past seven years (usually between 6% and 10% the majority of that time).
LINE Dividend Yield (TTM) data by YCharts
Navios Maritime Partners
Navios Maritime Partners L.P. is an international owner and operator of dry cargo vessels, providing transportation services for a wide range of commodities such as iron ore, coal, grain, and fertilizer. The company was founded in 2007 and is based in Piraeus, Greece.
|Gross Profit Margin (Quarterly)||91.59%|
|Profit Margin (Quarterly)||19.42%|
|Return on Assets||5.58%|
|Return on Equity||8.69%|
|Quarterly Revenue Growth (YOY)||-1.21%|
Current Price and Valuation
Navios Maritime Partners closed Monday at $18.68, which is $1.02 shy of its 52-week high and $5.46 higher than its 52-week low. The stock is trading higher than both its 200-day moving average of $16.72 and its 50-day moving average of $17.80.
Navios Maritime Partners is trading at a PE ratio of 21.99x and a price to book value of 1.88x.
For its latest quarter, Navios Maritime Partners reported earnings per share of $0.13. This was a significant drop compared to earnings per share of $0.28 for the same period prior year. Declining revenue has trickled down to the bottom line for NMM, but I believe recent moves such as growing its fleet through acquisitions of container vessels and increasing its cash flows will help reverse this trend going forward.
Navios Maritime Partners currently pays a $0.4425 per share quarterly dividend that yields 9.47%. The company has a strong history of making regular dividend payments and growing those payments over time. During the last earnings call, the company stated that it is committed to this minimum distribution throughout 2015, so there is no reason to assume that the dividend is in any danger, at least in the short term.
Neither of the stocks above can be considered perfect stocks (if those actually exist), but I do believe that both will reward long-term shareholders with substantial rewards over time. Both stocks have associated risks, such as Navios Maritime's link with the Baltic dry index and Linn Energy's relationship with oil and gas prices.
Both stocks are yielding just under 10% and, at current prices, I consider both stocks as potential buys for investors looking to add to their portfolio. As always, I suggest individual investors perform their own research before making any investment decisions.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.