3 Buy-Rated Dividend Stocks Taking The Lead: SLRC, FDUS, FULL

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 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."

Solar Capital

Dividend Yield: 7.30%

Solar Capital (NASDAQ: SLRC) shares currently have a dividend yield of 7.30%.

Solar Capital Ltd. is a business development company specializing in investments in leveraged middle market companies. The company has a P/E ratio of 13.00.

The average volume for Solar Capital has been 231,400 shares per day over the past 30 days. Solar Capital has a market cap of $962.5 million and is part of the financial services industry. Shares are down 3.4% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Solar Capital as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and expanding profit margins. 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 exceeded that of the S&P 500 and the Capital Markets industry average. The net income increased by 24.2% when compared to the same quarter one year prior, going from $23.30 million to $28.95 million.
  • Net operating cash flow has significantly increased by 345.00% to $522.71 million when compared to the same quarter last year. In addition, SOLAR CAPITAL LTD has also vastly surpassed the industry average cash flow growth rate of 93.28%.
  • The gross profit margin for SOLAR CAPITAL LTD is rather high; currently it is at 63.89%. Regardless of SLRC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SLRC's net profit margin of 81.85% significantly outperformed against the industry.
  • SLRC, with its decline in revenue, slightly underperformed the industry average of 7.7%. Since the same quarter one year prior, revenues fell by 14.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • SOLAR CAPITAL LTD has improved earnings per share by 8.3% 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, SOLAR CAPITAL LTD reported lower earnings of $1.70 versus $3.12 in the prior year. For the next year, the market is expecting a contraction of 0.6% in earnings ($1.69 versus $1.70).

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

Fidus Investment

Dividend Yield: 7.90%

Fidus Investment (NASDAQ: FDUS) shares currently have a dividend yield of 7.90%.

Fidus Investment Corporation operates as an externally managed, closed-end, and non-diversified management investment company. The company provides customized debt and equity financing solutions to lower middle-market companies in the United States. The company has a P/E ratio of 10.07.

The average volume for Fidus Investment has been 78,600 shares per day over the past 30 days. Fidus Investment has a market cap of $263.3 million and is part of the financial services industry. Shares are down 11.2% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Fidus Investment as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations 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 came in higher than the industry average of 7.7%. Since the same quarter one year prior, revenues rose by 14.3%. 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.
  • The gross profit margin for FIDUS INVESTMENT CORP is rather high; currently it is at 68.82%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 44.20% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 367.12% to $35.26 million when compared to the same quarter last year. In addition, FIDUS INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of 93.28%.
  • 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, FIDUS INVESTMENT CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • FIDUS INVESTMENT CORP's earnings per share declined by 50.0% 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, FIDUS INVESTMENT CORP increased its bottom line by earning $1.91 versus $1.32 in the prior year. For the next year, the market is expecting a contraction of 7.6% in earnings ($1.77 versus $1.91).

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

Full Circle Capital

Dividend Yield: 10.30%

Full Circle Capital (NASDAQ: FULL) shares currently have a dividend yield of 10.30%.

Full Circle Capital Corporation is a business development company and operates as an externally managed non-diversified closed-end management investment company. The company has a P/E ratio of 896.00.

The average volume for Full Circle Capital has been 351,400 shares per day over the past 30 days. Full Circle Capital has a market cap of $74.1 million and is part of the financial services industry. Shares are up 10.5% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Full Circle Capital as a buy. Among the primary strengths of the company is its generally strong cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 1117.59% to $18.28 million when compared to the same quarter last year. In addition, FULL CIRCLE CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of 93.28%.
  • FULL CIRCLE CAPITAL CORP 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, FULL CIRCLE CAPITAL CORP increased its bottom line by earning $0.52 versus $0.44 in the prior year. This year, the market expects an improvement in earnings ($0.73 versus $0.52).
  • FULL, with its decline in revenue, underperformed when compared the industry average of 7.7%. Since the same quarter one year prior, revenues fell by 27.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • In its most recent trading session, FULL 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.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Capital Markets industry and the overall market, FULL CIRCLE CAPITAL CORP's return on equity significantly trails that of both the industry average and 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.

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