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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."

OFS Capital

Dividend Yield: 12.50%

OFS Capital

(NASDAQ:

OFS

) shares currently have a dividend yield of 12.50%.

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 9.71.

The average volume for OFS Capital has been 27,200 shares per day over the past 30 days. OFS Capital has a market cap of $105.3 million and is part of the financial services industry. Shares are down 7.7% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

OFS Capital

TheStreet Recommends

as a

buy

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations, expanding profit margins and notable return on equity. 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 5.7%. 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.
  • 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).
  • Net operating cash flow has significantly increased by 129.99% to $9.08 million when compared to the same quarter last year. Despite an increase in cash flow of 129.99%, OFS CAPITAL CORP is still growing at a significantly lower rate than the industry average of 273.88%.
  • 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.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Capital Markets industry and the overall market, OFS CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.

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Delek Logistics Partners

Dividend Yield: 7.50%

Delek Logistics Partners

(NYSE:

DKL

) shares currently have a dividend yield of 7.50%.

Delek Logistics Partners, LP owns and operates logistics and marketing assets for crude oil, and intermediate and refined products in the United States. It operates through two segments, Pipelines and Transportation, and Wholesale Marketing and Terminalling. The company has a P/E ratio of 10.95.

The average volume for Delek Logistics Partners has been 44,400 shares per day over the past 30 days. Delek Logistics Partners has a market cap of $371.6 million and is part of the energy industry. Shares are down 12% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Delek Logistics Partners

as a

buy

. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income, good cash flow from operations, growth in earnings per share and expanding profit margins. 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:

  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 25.4% when compared to the same quarter one year prior, rising from $14.84 million to $18.60 million.
  • Net operating cash flow has remained constant at $20.20 million with no significant change when compared to the same quarter last year. Along with maintaining stable cash flow from operations, the firm exceeded the industry average cash flow growth rate of -26.50%.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 36.8%. Since the same quarter one year prior, revenues fell by 27.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • DELEK LOGISTICS PARTNERS LP has improved earnings per share by 26.7% in the most recent quarter compared to the same quarter a year ago. 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, DELEK LOGISTICS PARTNERS LP increased its bottom line by earning $2.87 versus $1.96 in the prior year. For the next year, the market is expecting a contraction of 6.6% in earnings ($2.68 versus $2.87).

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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 11.21.

The average volume for Golub Capital BDC has been 167,800 shares per day over the past 30 days. Golub Capital BDC has a market cap of $828.0 million and is part of the financial services industry. Shares are down 7.8% year-to-date as of the close of trading on Tuesday.

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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 somewhat disappointing return on equity.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 5.7%. 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 273.88%.
  • 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.
  • After a year of stock price fluctuations, the net result is that GBDC's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

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