3 Buy-Rated Dividend Stocks: CODI, TCRD, NRT

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 or Stephanie Link.

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

Compass Diversified Holdings Shares of Bene

Dividend Yield: 8.30%

Compass Diversified Holdings Shares of Bene (NYSE: CODI) shares currently have a dividend yield of 8.30%.

Compass Diversified Holdings is a public investment firm specializing in acquiring controlling stakes in small to middle market companies. The firm seeks to make middle market and buyout investments.

The average volume for Compass Diversified Holdings Shares of Bene has been 159,300 shares per day over the past 30 days. Compass Diversified Holdings Shares of Bene has a market cap of $833.2 million and is part of the diversified services industry. Shares are up 20.5% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Compass Diversified Holdings Shares of Bene as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, robust revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • Compared to where it was trading one year ago, CODI is up 27.50% to its most recent closing price of 17.71. Looking ahead, although the push and pull of a bull or bear market could certainly alter the outcome, our view is that this stock's positive fundamentals give it good potential for further appreciation.
  • The revenue growth came in higher than the industry average of 13.0%. Since the same quarter one year prior, revenues rose by 23.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.68, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.02, which illustrates the ability to avoid short-term cash problems.
  • 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 continued to lose money by earning -$0.05 versus -$0.81 in the prior year. This year, the market expects an improvement in earnings ($1.77 versus -$0.05).
  • 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 302.8% when compared to the same quarter one year prior, rising from -$0.79 million to $1.59 million.

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

THL Credit

Dividend Yield: 8.60%

THL Credit (NASDAQ: TCRD) shares currently have a dividend yield of 8.60%.

THL Credit, Inc. is a business development company specializing in direct and fund of fund investments. The fund seeks to invest in debt and equity securities of middle market companies. The company has a P/E ratio of 11.67.

The average volume for THL Credit has been 579,900 shares per day over the past 30 days. THL Credit has a market cap of $534.0 million and is part of the financial services industry. Shares are up 6.3% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates THL Credit as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share, compelling growth in net income, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 4.7%. Since the same quarter one year prior, revenues rose by 34.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • THL CREDIT INC has improved earnings per share by 17.9% 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, THL CREDIT INC increased its bottom line by earning $1.26 versus $1.19 in the prior year. This year, the market expects an improvement in earnings ($1.40 versus $1.26).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Capital Markets industry average. The net income increased by 51.0% when compared to the same quarter one year prior, rising from $5.71 million to $8.61 million.
  • The gross profit margin for THL CREDIT INC is rather high; currently it is at 62.37%. Regardless of TCRD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TCRD's net profit margin of 59.72% significantly outperformed against the industry.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.

North European Oil Royalty

Dividend Yield: 7.50%

North European Oil Royalty (NYSE: NRT) shares currently have a dividend yield of 7.50%.

North European Oil Royalty Trust, a grantor trust, holds overriding royalty rights covering gas and oil production in concessions or leases in the Federal Republic of Germany. It holds these rights under contracts with German exploration and development subsidiaries of ExxonMobil Corp. The company has a P/E ratio of 11.06.

The average volume for North European Oil Royalty has been 22,400 shares per day over the past 30 days. North European Oil Royalty has a market cap of $239.0 million and is part of the financial services industry. Shares are up 15.7% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates North European Oil Royalty 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, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:
  • NRT 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.02, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for NORTH EUROPEAN OIL RTY TR is currently very high, coming in at 100.00%. NRT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, NRT's net profit margin of 96.61% significantly outperformed against the industry.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.8%. Since the same quarter one year prior, revenues slightly dropped by 6.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NORTH EUROPEAN OIL RTY TR's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, NRT has underperformed the S&P 500 Index, declining 15.12% from its price level of one year ago. 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.

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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