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

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."

Compass Diversified Holdings

Dividend Yield: 8.50%

Compass Diversified Holdings

(NYSE:

CODI

) shares currently have a dividend yield of 8.50%.

Compass Diversified Holdings is a private equity firm specializing in acquisitions, buyouts, and middle market investments. It seeks to invest in manufacturing, distribution, consumer products, and business services sectors. The firm prefers to invest in companies based in North America. The company has a P/E ratio of 3.14.

The average volume for Compass Diversified Holdings has been 185,100 shares per day over the past 30 days. Compass Diversified Holdings has a market cap of $917.7 million and is part of the conglomerates industry. Shares are up 2.6% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Compass Diversified Holdings

as a

buy

. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, notable return on equity, attractive valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • COMPASS DIVERSIFIED HOLDINGS reported significant earnings per share improvement 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. We feel that this trend should continue. During the past fiscal year, COMPASS DIVERSIFIED HOLDINGS turned its bottom line around by earning $1.05 versus -$0.05 in the prior year. This year, the market expects an improvement in earnings ($1.50 versus $1.05).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Financial Services industry. The net income increased by 255.8% when compared to the same quarter one year prior, rising from $73.39 million to $261.10 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Financial Services industry and the overall market, COMPASS DIVERSIFIED HOLDINGS's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $34.84 million or 10.11% when compared to the same quarter last year. Despite an increase in cash flow, COMPASS DIVERSIFIED HOLDINGS's average is still marginally south of the industry average growth rate of 12.72%.

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Gladstone Investment Corporation

Dividend Yield: 9.70%

Gladstone Investment Corporation

(NASDAQ:

GAIN

) shares currently have a dividend yield of 9.70%.

Gladstone Investment Corporation is a business development company specializing in buyouts. The company has a P/E ratio of 52.93.

The average volume for Gladstone Investment Corporation has been 140,000 shares per day over the past 30 days. Gladstone Investment Corporation has a market cap of $196.2 million and is part of the financial services industry. Shares are up 5.7% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

TheStreet Recommends

Gladstone Investment Corporation

as a

buy

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

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 13.0%. Since the same quarter one year prior, revenues rose by 33.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for GLADSTONE INVESTMENT CORP/DE is currently very high, coming in at 72.39%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 65.63% significantly outperformed against the industry average.
  • 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 171.0% when compared to the same quarter one year prior, rising from -$10.69 million to $7.59 million.
  • GLADSTONE INVESTMENT CORP/DE reported significant earnings per share improvement 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, GLADSTONE INVESTMENT CORP/DE swung to a loss, reporting -$0.06 versus $0.63 in the prior year. This year, the market expects an improvement in earnings ($0.76 versus -$0.06).
  • 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, GLADSTONE INVESTMENT CORP/DE's return on equity is below that of both the industry average and the S&P 500.

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Dominion Resources Black Warrior

Dividend Yield: 11.40%

Dominion Resources Black Warrior

(NYSE:

DOM

) shares currently have a dividend yield of 11.40%.

Dominion Resources Black Warrior Trust operates as a grantor trust in the United States. The company has a P/E ratio of 8.31.

The average volume for Dominion Resources Black Warrior has been 41,500 shares per day over the past 30 days. Dominion Resources Black Warrior has a market cap of $48.3 million and is part of the financial services industry. Shares are up 10.5% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates

Dominion Resources Black Warrior

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, notable return on equity and expanding profit margins. 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 19.6%. Since the same quarter one year prior, revenues slightly increased by 0.9%. 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.
  • DOM 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.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, DOMINION RES BLACK WARRIOR's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for DOMINION RES BLACK WARRIOR is currently very high, coming in at 100.00%. DOM has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, DOM's net profit margin of 85.17% significantly outperformed against the industry.
  • DOMINION RES BLACK WARRIOR' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, DOMINION RES BLACK WARRIOR increased its bottom line by earning $0.70 versus $0.54 in the prior year.

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