The market's recent volatility likely has some people heading for the exits. More opportunistic investors, though, could have a chance to pick up cheaply shares of companies that have seen a considerable decline. That can be especially true for dividend stocks that are, generally speaking, more stable investments over the long term.

On the other hand, sometimes a stock has been beaten down for a reason, and it's your job as the investor to determine whether the stock is a real buying opportunity or a red herring. Three dividend stocks -- liquefied natural gas shipper Golar LNG Partners (GMLP), oil and gas drilling rig lessor Nabors Industries (NBR -4.27%), and specialty chemical manufacturer Kronos Worldwide (KRO -1.48%) -- have been hit particularly hard in 2018, so much so that their dividend yields are now north of 4.5%. Let's take a look at these three stocks and see if they are buys now. 

Stock chart superimposed over $100 bills and a calculator.

Image source: Getty Images.

Resetting expectations

So far, shares of Golar LNG Partners have not lived up to the hype associated with the market for liquefied natural gas (LNG). This was supposed to be a red-hot market in which LNG demand in Asia was absorbing much more supply than anticipated as recently as a year ago. One would think that a company that charters LNG vessels, floating regasification units, and floating liquefaction facilities would be making a killing right now. 

That hasn't been the case with Golar LNG Partners, though, because the shipping rates to move LNG have gone down considerably in recent years, as the market for floating regasification and floating liquefaction has been slower to develop than originally anticipated. To make things worse, Golar's joint-venture partner, Schlumberger, elected to walk away from the OneLNG venture designed to market Schlumberger's production management and Golar's liquefaction vessels together. 

Because of these issues, Golar LNG's revenue and cash flow were drying up to the point that its payout was unsustainable. So management made the recent decision to cut its payout by 30% to $1.62 per unit on an annualized basis. It looks like the cut was the right decision, as its distribution coverage ratio improved from 0.52 in the second quarter to 1.04 in the most recent report. While it's not the best coverage ratio, it is a vast improvement as the company starts on some new shipping charters for its transportation vessels and gets full-year contributions from its liquefaction facility.

Buying Golar LNG Partners today looks much safer than it did a few months ago, and its current yield of 11.2% sounds incredibly enticing. It's probably best, though, to wait and see if it can deliver a few quarters of strong performance and enough cash flow to cover its payout and leave some cash left over to invest in some of its growth projects. 

Still has some housecleaning to do

You have to give Nabors some credit for maintaining its dividend payments throughout the downturn in drilling activity from 2014 to 2016. The company was somehow able to get through it while still paying its shareholders a dividend that currently yields 4.7%. It's probably no coincidence that those dividends continued, as the company has a decent proportion of its shares owned by management (about 9%).

Nabors is very much a tale of two businesses. On the one hand, it has a fleet of highly capable rigs that are in high demand and can exert some pricing power with potential customers. About 85% of its U.S. land rigs that have drives of more than 1,500 horsepower are currently active. These rigs have been the driving force for the company's slow march back toward profitability and one of the reasons that it is finally making good on its promise to lower its debt levels

On the other hand, though, the company is still sitting on a large fleet of legacy rigs that, frankly, won't find work in the oil patch again. For some reason, management has insisted on keeping these rigs around even though they have been nothing but a drag on the bottom line. That large number of unusable rigs is part of the reason  the company's stock trades at such a large discount to its book value. Basically, the market is already discounting the book value of these deadweight assets. 

There is a profitable business at Nabors, but it is still buried under a pile of legacy rigs and a burdensome debt load. Until management can seriously address these two issues, it hardly seems worth taking a flyer on this cheap stock.

GMLP Chart

GMLP data by YCharts.

Twice bitten, still shy

Kronos Worldwide is one of the world's largest producers of titanium dioxide, perhaps one of the most ubiquitous chemicals you have never heard of. It's a white pigment that is commonly used in a wide variety of products including paints, plastics, paper, food, and cosmetics. Because of its broad range of use, consumption of the product tends to follow economic growth trends. However, two recent crashes fresh in Wall Street's mind keep shares of Kronos at a price-to-earnings ratio of 6.5 and a dividend yield of 5.2%. 

Titanium dioxide isn't a high-value commodity, nor are there high barriers to entry for this product. That largely helps to explain why Kronos has struggled so much this year and why the past decade and a half have resulted in wild price swings for both the commodity and its stock. After the Great Recession, Chinese manufacturers ramped up production for the pigment at a blistering pace, which led to a massive oversupply that took years to recover from. The industry as a whole started to recover in 2016 and 2017. 

After two years of strong gains and some signs that the Chinese and other global economies are starting to show signs of strain, though, investors have been pulling out of this stock in what looks like anticipation of the next down cycle. Kronos hasn't done itself any favors, either, as it has missed earnings expectations every quarter in 2018. 

The good news is that the business doesn't require a lot of capital spending to sustain itself, and it has a good balance sheet (cash on hand is roughly equivalent to total debt outstanding). It looks like Kronos has the financial strength to weather the ups and downs of the industry without its dividend being at too much risk. At the same time, though, this stock could decline more if economic activity outside the U.S. continues to slow down and demand for titanium oxide dwindles.