4 Buy-Rated Dividend Stocks: BKCC, GBDC, NMFC, NRP

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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 and 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 4 stocks with substantial yields, that ultimately, we have rated "Buy."

BlackRock Kelso Capital Corporation

Dividend Yield: 10.80%

BlackRock Kelso Capital Corporation (NASDAQ: BKCC) shares currently have a dividend yield of 10.80%.

BlackRock Kelso Capital Corporation is a private equity firm specializing in investments in middle market companies. The firm invests in all industries. The company has a P/E ratio of 10.79.

The average volume for BlackRock Kelso Capital Corporation has been 648,500 shares per day over the past 30 days. BlackRock Kelso Capital Corporation has a market cap of $711.3 million and is part of the financial services industry. Shares are down 4.6% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates BlackRock Kelso Capital Corporation as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, attractive valuation levels, good cash flow from operations, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

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 46.8% when compared to the same quarter one year prior, rising from $20.30 million to $29.80 million.
  • Net operating cash flow has significantly increased by 327.10% to $49.61 million when compared to the same quarter last year. In addition, BLACKROCK KELSO CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -324.31%.
  • The gross profit margin for BLACKROCK KELSO CAPITAL CORP is rather high; currently it is at 58.10%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, BKCC's net profit margin of 95.71% significantly outperformed against the industry.
  • BLACKROCK KELSO CAPITAL CORP has improved earnings per share by 39.3% 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, BLACKROCK KELSO CAPITAL CORP reported lower earnings of $0.78 versus $1.06 in the prior year. This year, the market expects an improvement in earnings ($0.85 versus $0.78).

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

Golub Capital BDC Inc. Class B

Dividend Yield: 7.20%

Golub Capital BDC Inc. Class B (NASDAQ: GBDC) shares currently have a dividend yield of 7.20%.

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 14.30.

The average volume for Golub Capital BDC Inc. Class B has been 477,000 shares per day over the past 30 days. Golub Capital BDC Inc. Class B has a market cap of $603.2 million and is part of the financial services industry. Shares are up 11.7% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Golub Capital BDC Inc. Class B 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, increase in stock price during the past year and increase in net income. We feel these 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 6.3%. Since the same quarter one year prior, revenues rose by 17.3%. 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 increased to -$19.37 million or 45.15% 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 -324.31%.
  • The gross profit margin for GOLUB CAPITAL BDC INC is currently very high, coming in at 70.80%. 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 55.80% significantly outperformed against the industry.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Capital Markets industry average. The net income increased by 7.2% when compared to the same quarter one year prior, going from $11.43 million to $12.25 million.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

New Mountain Finance

Dividend Yield: 9.10%

New Mountain Finance (NYSE: NMFC) shares currently have a dividend yield of 9.10%.

New Mountain Finance Corporation operates as a closed-end, non-diversified management investment company. The company has a P/E ratio of 6.82.

The average volume for New Mountain Finance has been 333,100 shares per day over the past 30 days. New Mountain Finance has a market cap of $465.8 million and is part of the financial services industry. Shares are down 4.2% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates New Mountain Finance 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, notable return on equity and increase in stock price during the past year. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 6.3%. Since the same quarter one year prior, revenues rose by 33.1%. 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 increased to -$15.76 million or 47.66% when compared to the same quarter last year. In addition, NEW MOUNTAIN FINANCE CORP has also vastly surpassed the industry average cash flow growth rate of -324.31%.
  • The gross profit margin for NEW MOUNTAIN FINANCE CORP is rather high; currently it is at 58.10%. Regardless of NMFC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NMFC's net profit margin of 97.01% significantly outperformed against the industry.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Capital Markets industry average. The net income increased by 3.8% when compared to the same quarter one year prior, going from $23.67 million to $24.56 million.
  • 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, NEW MOUNTAIN FINANCE CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

Natural Resources Partners L.P

Dividend Yield: 9.80%

Natural Resources Partners L.P (NYSE: NRP) shares currently have a dividend yield of 9.80%.

Natural Resource Partners L.P., through its subsidiaries, engages in the ownership, management, and leasing of mineral properties in the United States. It owns coal reserves in Appalachia, the Illinois Basin, and the Western United States, as well as lignite reserves in the Gulf Coast region. The company has a P/E ratio of 11.61.

The average volume for Natural Resources Partners L.P has been 217,800 shares per day over the past 30 days. Natural Resources Partners L.P has a market cap of $2.5 billion and is part of the metals & mining industry. Shares are up 21.4% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Natural Resources Partners L.P as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The gross profit margin for NATURAL RESOURCE PARTNERS LP is currently very high, coming in at 93.80%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 54.88% significantly outperformed against the industry average.
  • 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. In comparison to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, NATURAL RESOURCE PARTNERS LP has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.6%. Since the same quarter one year prior, revenues slightly dropped by 5.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • NATURAL RESOURCE PARTNERS LP's earnings per share declined by 8.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, NATURAL RESOURCE PARTNERS LP increased its bottom line by earning $1.97 versus $0.50 in the prior year. For the next year, the market is expecting a contraction of 12.2% in earnings ($1.73 versus $1.97).
  • Currently the debt-to-equity ratio of 1.69 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, NRP's quick ratio is somewhat strong at 1.49, demonstrating the ability to handle short-term liquidity needs.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
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