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."

TCP Capital

Dividend Yield: 10.90%

TCP Capital

(NASDAQ:

TCPC

) shares currently have a dividend yield of 10.90%.

TCP Capital Corp. is a business development company specializing in direct equity and debt investments in middle-market, senior secured loans, junior loans, originated loans, mezzanine, senior debt instruments, bonds, and secondary-market investments. It seeks to invest in the United States. The company has a P/E ratio of 8.45.

The average volume for TCP Capital has been 208,000 shares per day over the past 30 days. TCP Capital has a market cap of $644.6 million and is part of the financial services industry. Shares are down 5.3% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

TCP Capital

as a

buy

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income, good cash flow from operations, expanding profit margins and growth in earnings per share. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 0.4%. Since the same quarter one year prior, revenues rose by 30.6%. 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 Capital Markets industry. The net income increased by 48.2% when compared to the same quarter one year prior, rising from $11.83 million to $17.53 million.
  • Net operating cash flow has significantly increased by 76.23% to -$38.35 million when compared to the same quarter last year. In addition, TCP CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -50.61%.
  • The gross profit margin for TCP CAPITAL CORP is currently very high, coming in at 80.42%. Regardless of TCPC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TCPC's net profit margin of 49.38% significantly outperformed against the industry.
  • TCP CAPITAL CORP has improved earnings per share by 24.1% 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, TCP CAPITAL CORP reported lower earnings of $0.96 versus $1.94 in the prior year. This year, the market expects an improvement in earnings ($1.60 versus $0.96).

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OFS Capital

Dividend Yield: 12.80%

OFS Capital

(NASDAQ:

OFS

) shares currently have a dividend yield of 12.80%.

OFS Capital Corporation is a business development company specializing in direct and fund investments. For direct, it specializes in debt and structured equity investments in lower middle market companies. The fund invests in companies based in United States. The company has a P/E ratio of 9.04.

The average volume for OFS Capital has been 32,500 shares per day over the past 30 days. OFS Capital has a market cap of $102.9 million and is part of the financial services industry. Shares are down 7% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

TheStreet Recommends

OFS Capital

as a

buy

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations, notable return on equity and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 0.4%. Since the same quarter one year prior, revenues rose by 24.1%. 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 129.99% to $9.08 million when compared to the same quarter last year. In addition, OFS CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -50.61%.
  • 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 Capital Markets industry and the overall market on the basis of return on equity, OFS CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • OFS CAPITAL CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, OFS CAPITAL CORP increased its bottom line by earning $1.03 versus $0.81 in the prior year. This year, the market expects an improvement in earnings ($1.29 versus $1.03).
  • The gross profit margin for OFS CAPITAL CORP is rather high; currently it is at 63.25%. Regardless of OFS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, OFS's net profit margin of 18.48% compares favorably to the industry average.

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Newtek Business Services

Dividend Yield: 14.90%

Newtek Business Services

(NASDAQ:

NEWT

) shares currently have a dividend yield of 14.90%.

Newtek Business Services Corp., a business development company, provides financial and business services to the small-and medium-sized business market in the United States and internationally.

The average volume for Newtek Business Services has been 125,900 shares per day over the past 30 days. Newtek Business Services has a market cap of $136.3 million and is part of the diversified services industry. Shares are down 24.6% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates

Newtek Business Services

as a

buy

. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, impressive record of earnings per share growth and notable return on equity. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • 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 79.6% when compared to the same quarter one year prior, rising from $2.64 million to $4.75 million.
  • NEWTEK BUSINESS SERVICES CP has improved earnings per share by 31.4% 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, NEWTEK BUSINESS SERVICES CP reported lower earnings of $0.59 versus $1.00 in the prior year. This year, the market expects an improvement in earnings ($1.92 versus $0.59).
  • 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. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, NEWTEK BUSINESS SERVICES CP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • NEWT, with its very weak revenue results, has greatly underperformed against the industry average of 0.4%. Since the same quarter one year prior, revenues plummeted by 81.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • NEWT's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 27.52%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.

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