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."

PennantPark Floating Rate Capital

Dividend Yield: 7.80%

PennantPark Floating Rate Capital

(NASDAQ:

PFLT

) shares currently have a dividend yield of 7.80%.

PennantPark Floating Rate Capital Ltd. is a business development company. It seeks to make secondary direct, debt, equity, and loan investments. The fund seeks to invest through floating rate loans in private or thinly traded or small market-cap, public middle market companies. The company has a P/E ratio of 8.33.

The average volume for PennantPark Floating Rate Capital has been 66,500 shares per day over the past 30 days. PennantPark Floating Rate Capital has a market cap of $206.0 million and is part of the financial services industry. Shares are up 0.8% year-to-date as of the close of trading on Thursday.

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

TheStreet Ratings rates

PennantPark Floating Rate Capital

as a

buy

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, good cash flow from operations, expanding profit margins and increase in stock price during the past year. 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:

  • PFLT's very impressive revenue growth greatly exceeded the industry average of 2.6%. Since the same quarter one year prior, revenues leaped by 64.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 215.4% when compared to the same quarter one year prior, rising from $1.57 million to $4.94 million.
  • Net operating cash flow has significantly increased by 153.15% to $27.18 million when compared to the same quarter last year. In addition, PENNANTPARK FLOATING RT CAP has also vastly surpassed the industry average cash flow growth rate of -89.21%.
  • The gross profit margin for PENNANTPARK FLOATING RT CAP is rather high; currently it is at 68.48%. Regardless of PFLT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PFLT's net profit margin of 64.44% significantly outperformed against the industry.
  • 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. When compared to other companies in the Capital Markets industry and the overall market, PENNANTPARK FLOATING RT CAP's return on equity is below that of both the industry average and the S&P 500.

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

Educational Development

Dividend Yield: 7.40%

Educational Development

(NASDAQ:

EDUC

) shares currently have a dividend yield of 7.40%.

Educational Development Corporation operates as a trade publisher of the line of educational children's books in the United States. The company has a P/E ratio of 33.15.

The average volume for Educational Development has been 7,600 shares per day over the past 30 days. Educational Development has a market cap of $17.2 million and is part of the media industry. Shares are up 41% year-to-date as of the close of trading on Thursday.

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

TheStreet Ratings rates

Educational Development

as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 8.7%. Since the same quarter one year prior, revenues rose by 19.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Distributors industry. The net income increased by 258.2% when compared to the same quarter one year prior, rising from $0.07 million to $0.24 million.
  • The gross profit margin for EDUCATIONAL DEVELOPMENT CORP is rather high; currently it is at 60.39%. 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 3.34% trails the industry average.
  • EDUC's debt-to-equity ratio is very low at 0.04 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.71 is somewhat weak and could be cause for future problems.
  • Powered by its strong earnings growth of 200.00% and other important driving factors, this stock has surged by 84.35% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.

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

Golub Capital BDC

Dividend Yield: 7.90%

Golub Capital BDC

(NASDAQ:

GBDC

) shares currently have a dividend yield of 7.90%.

Golub Capital BDC, Inc. is a business development company and operates as an externally managed closed-end non-diversified management investment company. It invests in debt and minority equity investments in middle-market companies that are, in most cases, sponsored by private equity investors. The company has a P/E ratio of 11.96.

The average volume for Golub Capital BDC has been 187,900 shares per day over the past 30 days. Golub Capital BDC has a market cap of $760.1 million and is part of the financial services industry. Shares are down 14.9% year-to-date as of the close of trading on Thursday.

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

TheStreet Ratings rates

Golub Capital BDC

as a

buy

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, expanding profit margins, good cash flow from operations and growth in earnings per share. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 2.6%. Since the same quarter one year prior, revenues rose by 25.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for GOLUB CAPITAL BDC INC is currently very high, coming in at 73.79%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 58.08% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 68.69% to -$51.69 million when compared to the same quarter last year. In addition, GOLUB CAPITAL BDC INC has also vastly surpassed the industry average cash flow growth rate of -89.21%.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 28.6% when compared to the same quarter one year prior, rising from $12.66 million to $16.28 million.
  • GOLUB CAPITAL BDC INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, GOLUB CAPITAL BDC INC increased its bottom line by earning $1.36 versus $1.31 in the prior year. For the next year, the market is expecting a contraction of 8.8% in earnings ($1.24 versus $1.36).

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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