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: 11.10%

TCP Capital

(NASDAQ:

TCPC

) shares currently have a dividend yield of 11.10%.

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 8.39.

The average volume for TCP Capital has been 213,500 shares per day over the past 30 days. TCP Capital has a market cap of $635.3 million and is part of the financial services industry. Shares are down 6.8% year-to-date as of the close of trading on Tuesday.

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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 lackluster performance in the stock itself.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 4.3%. 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 -98.58%.
  • 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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Highway Holdings

Dividend Yield: 11.80%

Highway Holdings

(NASDAQ:

HIHO

) shares currently have a dividend yield of 11.80%.

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 21.19.

The average volume for Highway Holdings has been 13,700 shares per day over the past 30 days. Highway Holdings has a market cap of $12.9 million and is part of the industrial industry. Shares are down 28.4% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates

Highway Holdings

as a

buy

. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, relatively strong performance when compared with the S&P 500 during the past year and notable return on equity. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • 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. Along with this, the company maintains a quick ratio of 2.61, which clearly demonstrates the ability to cover short-term cash needs.
  • Despite the weak revenue results, HIHO has outperformed against the industry average of 20.0%. Since the same quarter one year prior, revenues slightly dropped by 5.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • HIGHWAY HOLDINGS LTD's earnings per share declined by 10.0% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, HIGHWAY HOLDINGS LTD increased its bottom line by earning $0.31 versus $0.16 in the prior year.
  • 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 Machinery industry average. The net income has decreased by 5.5% when compared to the same quarter one year ago, dropping from $0.36 million to $0.34 million.

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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 11.23.

The average volume for Golub Capital BDC has been 177,100 shares per day over the past 30 days. Golub Capital BDC has a market cap of $830.8 million and is part of the financial services industry. Shares are down 3.2% 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, compelling growth in net income, 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 lackluster performance in the stock itself.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 4.3%. Since the same quarter one year prior, revenues rose by 10.7%. 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 36.0% when compared to the same quarter one year prior, rising from $15.17 million to $20.64 million.
  • Net operating cash flow has significantly increased by 156.34% to $23.02 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 -98.58%.
  • The gross profit margin for GOLUB CAPITAL BDC INC is currently very high, coming in at 72.24%. 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 67.66% 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. 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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