Buy-Rated Dividend Stocks In The Top 4: KCAP, PNNT, NTLS, NMFC

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

KCAP Financial

Dividend Yield: 12.30%

KCAP Financial (NASDAQ: KCAP) shares currently have a dividend yield of 12.30%.

Kohlberg Capital Corporation is a private equity and venture capital firm specializing in mid market, buyouts, and mezzanine investments. It focuses on mature and middle market companies. The company has a P/E ratio of 8.15.

The average volume for KCAP Financial has been 249,400 shares per day over the past 30 days. KCAP Financial has a market cap of $271.7 million and is part of the financial services industry. Shares are down 11.9% year to date as of the close of trading on Monday.

TheStreet Ratings rates KCAP Financial as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels, notable return on equity, increase in stock price during the past year and expanding profit margins. 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 revenue growth greatly exceeded the industry average of 8.6%. Since the same quarter one year prior, revenues rose by 22.1%. 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.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, KCAP FINANCIAL INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • 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.
  • KCAP FINANCIAL INC 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, KCAP FINANCIAL INC increased its bottom line by earning $0.91 versus $0.32 in the prior year. This year, the market expects an improvement in earnings ($0.92 versus $0.91).

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

Pennant Park Investment Corporation

Dividend Yield: 9.80%

Pennant Park Investment Corporation (NASDAQ: PNNT) shares currently have a dividend yield of 9.80%.

PennantPark Investment Corporation is a publicly listed business development firm specializing in direct and mezzanine investments in middle market companies. It invests in the form of mezzanine debt, senior secured loans, and equity investments. The company has a P/E ratio of 8.20.

The average volume for Pennant Park Investment Corporation has been 321,300 shares per day over the past 30 days. Pennant Park Investment Corporation has a market cap of $758.6 million and is part of the financial services industry. Shares are up 3.7% year to date as of the close of trading on Monday.

TheStreet Ratings rates Pennant Park Investment Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, expanding profit margins, good cash flow from operations and compelling growth in net income. 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 came in higher than the industry average of 8.6%. Since the same quarter one year prior, revenues rose by 14.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for PENNANTPARK INVESTMENT CORP is rather high; currently it is at 65.79%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 40.87% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 345.59% to $74.24 million when compared to the same quarter last year. In addition, PENNANTPARK INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of 269.14%.
  • 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 303.2% when compared to the same quarter one year prior, rising from $3.42 million to $13.79 million.

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

NTELOS Holdings

Dividend Yield: 7.60%

NTELOS Holdings (NASDAQ: NTLS) shares currently have a dividend yield of 7.60%.

NTELOS Holdings Corp., through its subsidiaries, provides digital wireless communications services to consumers and businesses primarily in Virginia and West Virginia, as well as parts of Maryland, North Carolina, Pennsylvania, Ohio, and Kentucky. The company has a P/E ratio of 25.70.

The average volume for NTELOS Holdings has been 265,600 shares per day over the past 30 days. NTELOS Holdings has a market cap of $475.3 million and is part of the telecommunications industry. Shares are up 68.8% year to date as of the close of trading on Monday.

TheStreet Ratings rates NTELOS Holdings as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, solid stock price performance, compelling growth in net income and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 0.8%. Since the same quarter one year prior, revenues rose by 14.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 118.18% and other important driving factors, this stock has surged by 54.92% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, NTLS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Wireless Telecommunication Services industry and the overall market, NTELOS HOLDINGS CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Wireless Telecommunication Services industry. The net income increased by 129.7% when compared to the same quarter one year prior, rising from $4.61 million to $10.58 million.
  • NTELOS HOLDINGS CORP 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, NTELOS HOLDINGS CORP reported lower earnings of $0.87 versus $1.04 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus $0.87).

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: 9.30%

New Mountain Finance (NYSE: NMFC) shares currently have a dividend yield of 9.30%.

New Mountain Finance Corporation operates as a closed-end, non-diversified management investment company. The company has a P/E ratio of 7.91.

The average volume for New Mountain Finance has been 400,600 shares per day over the past 30 days. New Mountain Finance has a market cap of $657.5 million and is part of the financial services industry. Shares are down 2.5% year to date as of the close of trading on Monday.

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, attractive valuation levels, expanding profit margins, good cash flow from operations and increase in stock price during the past year. 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 revenue growth came in higher than the industry average of 8.6%. Since the same quarter one year prior, revenues rose by 18.6%. 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.
  • The gross profit margin for NEW MOUNTAIN FINANCE CORP is rather high; currently it is at 61.45%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 79.39% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 175.55% to $63.21 million when compared to the same quarter last year. Despite an increase in cash flow of 175.55%, NEW MOUNTAIN FINANCE CORP is still growing at a significantly lower rate than the industry average of 269.14%.
  • 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.

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