4 Buy-Rated Dividend Stocks To Check Out: KCAP, MSB, HTGC, TCRD

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: 11.90%

KCAP Financial (NASDAQ: KCAP) shares currently have a dividend yield of 11.90%.

KCAP Financial, Inc. 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 8.43.

The average volume for KCAP Financial has been 228,500 shares per day over the past 30 days. KCAP Financial has a market cap of $281.0 million and is part of the financial services industry. Shares are down 8.3% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates KCAP Financial as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, 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 revenue growth greatly exceeded the industry average of 8.8%. 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.
  • 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).
  • The gross profit margin for KCAP FINANCIAL INC is currently very high, coming in at 82.83%. Regardless of KCAP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, KCAP's net profit margin of -0.73% significantly underperformed when compared to the industry average.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Capital Markets industry and the overall market, KCAP FINANCIAL INC's return on equity is below that of both the industry average and the S&P 500.
  • In its most recent trading session, KCAP has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.

Mesabi

Dividend Yield: 9.30%

Mesabi (NYSE: MSB) shares currently have a dividend yield of 9.30%.

Mesabi Trust operates as a royalty trust in the United States. The company produces iron ore pellets. It holds interest in the Peter Mitchell mine located in the Mesabi Iron Range near Babbitt, Minnesota. The company has a P/E ratio of 13.78.

The average volume for Mesabi has been 67,500 shares per day over the past 30 days. Mesabi has a market cap of $287.5 million and is part of the financial services industry. Shares are down 13.6% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Mesabi 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, notable return on equity and expanding profit margins. 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:
  • MSB 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. To add to this, MSB has a quick ratio of 1.63, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 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 Metals & Mining industry and the overall market, MESABI TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for MESABI TRUST is currently very high, coming in at 100.00%. MSB has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, MSB's net profit margin of 97.33% significantly outperformed against the industry.
  • The revenue fell significantly faster than the industry average of 3.8%. Since the same quarter one year prior, revenues fell by 29.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The share price of MESABI TRUST has not done very well: it is down 8.99% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.

Hercules Technology Growth Capital

Dividend Yield: 7.40%

Hercules Technology Growth Capital (NYSE: HTGC) shares currently have a dividend yield of 7.40%.

Hercules Technology Growth Capital, Inc. is a private equity, venture capital, and venture debt firm specializing in providing debt and equity to privately held venture capital and private equity backed companies and select publicly-traded companies. The company has a P/E ratio of 9.76.

The average volume for Hercules Technology Growth Capital has been 445,400 shares per day over the past 30 days. Hercules Technology Growth Capital has a market cap of $1.0 billion and is part of the real estate industry. Shares are up 44.9% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Hercules Technology Growth Capital as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, solid stock price performance, compelling growth in net income and good cash flow from operations. 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:
  • HTGC's very impressive revenue growth greatly exceeded the industry average of 8.8%. Since the same quarter one year prior, revenues leaped by 71.6%. Growth in the company's revenue appears to have helped boost the 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, HERCULES TECH GROWTH CAP INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Powered by its strong earnings growth of 555.55% and other important driving factors, this stock has surged by 58.87% 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, HTGC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • 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 679.4% when compared to the same quarter one year prior, rising from $4.75 million to $36.98 million.
  • Net operating cash flow has significantly increased by 313.98% to $98.25 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 269.25%.

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: 8.30%

THL Credit (NASDAQ: TCRD) shares currently have a dividend yield of 8.30%.

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 11.34.

The average volume for THL Credit has been 204,200 shares per day over the past 30 days. THL Credit has a market cap of $557.4 million and is part of the financial services industry. Shares are up 10.2% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates THL Credit as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, expanding profit margins, increase in stock price during the past year 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 8.8%. Since the same quarter one year prior, revenues rose by 33.9%. 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.
  • The gross profit margin for THL CREDIT INC is rather high; currently it is at 69.02%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 40.69% significantly outperformed against the industry average.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Capital Markets industry average. The net income increased by 25.8% when compared to the same quarter one year prior, rising from $6.17 million to $7.76 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.
  • THL CREDIT INC's earnings per share declined by 23.3% 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, 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 ($1.45 versus $1.26).

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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