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."

Golub Capital BDC

Dividend Yield: 8.20%

Golub Capital BDC

(NASDAQ:

GBDC

) shares currently have a dividend yield of 8.20%.

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 10.83.

The average volume for Golub Capital BDC has been 172,600 shares per day over the past 30 days. Golub Capital BDC has a market cap of $799.8 million and is part of the financial services industry. Shares are down 6.5% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Golub Capital BDC

as a

buy

. The company's strengths can be seen in multiple areas, such as its 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:

  • GBDC's revenue growth has slightly outpaced the industry average of 0.3%. Since the same quarter one year prior, revenues slightly increased by 9.4%. 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.
  • Net operating cash flow has significantly increased by 6708.33% to $67.41 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 -52.93%.
  • The gross profit margin for GOLUB CAPITAL BDC INC is rather high; currently it is at 65.98%. Regardless of GBDC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GBDC's net profit margin of 58.02% significantly outperformed against the industry.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Capital Markets industry average. The net income has decreased by 3.5% when compared to the same quarter one year ago, dropping from $20.18 million to $19.47 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, GOLUB CAPITAL BDC INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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Highway Holdings

Dividend Yield: 9.30%

Highway Holdings

(NASDAQ:

HIHO

) shares currently have a dividend yield of 9.30%.

Highway Holdings Limited, through its subsidiaries, manufactures and sells metal, plastic, electric, and electronic components, subassemblies, and finished products for original equipment manufacturers (OEM) and contract manufacturers. The company has a P/E ratio of 27.00.

The average volume for Highway Holdings has been 11,700 shares per day over the past 30 days. Highway Holdings has a market cap of $16.4 million and is part of the industrial industry. Shares are down 5.4% year-to-date as of the close of trading on Thursday.

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TheStreet Recommends

TheStreet Ratings rates

Highway Holdings

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, solid stock price performance, increase in net income and attractive valuation levels. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 20.6%. Since the same quarter one year prior, revenues slightly increased by 4.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • HIHO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, HIHO has a quick ratio of 2.47, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Compared to its closing price of one year ago, HIHO's share price has jumped by 39.81%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HIHO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Machinery industry average. The net income increased by 5.6% when compared to the same quarter one year prior, going from $0.37 million to $0.39 million.

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Collectors Universe

Dividend Yield: 9.30%

Collectors Universe

(NASDAQ:

CLCT

) shares currently have a dividend yield of 9.30%.

Collectors Universe Inc. provides third-party authentication, grading, and related services for rare and high-value collectibles consisting of coins, trading cards, sports memorabilia, and autographs. The company has a P/E ratio of 16.96.

The average volume for Collectors Universe has been 30,900 shares per day over the past 30 days. Collectors Universe has a market cap of $134.0 million and is part of the diversified services industry. Shares are down 2.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Collectors Universe

as a

buy

. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures, notable return on equity, 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 net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Diversified Consumer Services industry average. The net income increased by 7.0% when compared to the same quarter one year prior, going from $1.80 million to $1.93 million.
  • CLCT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.50, which illustrates the ability to avoid short-term cash problems.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Diversified Consumer Services industry and the overall market, COLLECTORS UNIVERSE INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for COLLECTORS UNIVERSE INC is rather high; currently it is at 67.12%. It has increased from the same quarter the previous year.
  • CLCT, with its decline in revenue, underperformed when compared the industry average of 12.8%. Since the same quarter one year prior, revenues slightly dropped by 9.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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