Don't Miss Out: Top 3 Yielding Buy-Rated Stocks: SLRC, FDUS, BKCC

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 271,700 shares per day over the past 30 days. Solar Capital has a market cap of $957.3 million and is part of the financial services industry. Shares are down 3.2% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Solar Capital as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins 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:
  • 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 96.60%.
  • 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.
  • The net income growth from the same quarter one year ago has exceeded that of the Capital Markets industry average, but is less than that of the S&P 500. 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.
  • SLRC, with its decline in revenue, slightly underperformed the industry average of 10.4%. 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: 8.40%

Fidus Investment (NASDAQ: FDUS) shares currently have a dividend yield of 8.40%.

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 92,400 shares per day over the past 30 days. Fidus Investment has a market cap of $248.0 million and is part of the financial services industry. Shares are down 17.1% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Fidus Investment 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 came in higher than the industry average of 10.4%. Since the same quarter one year prior, revenues rose by 16.6%. 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 FIDUS INVESTMENT CORP is currently very high, coming in at 70.43%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 41.00% significantly outperformed against the industry average.
  • 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 20.9% 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 $2.01 versus $1.91 in the prior year. For the next year, the market is expecting a contraction of 12.2% in earnings ($1.77 versus $2.01).
  • In its most recent trading session, FDUS 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.

BlackRock Kelso Capital Corporation

Dividend Yield: 11.50%

BlackRock Kelso Capital Corporation (NASDAQ: BKCC) shares currently have a dividend yield of 11.50%.

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 7.77.

The average volume for BlackRock Kelso Capital Corporation has been 575,700 shares per day over the past 30 days. BlackRock Kelso Capital Corporation has a market cap of $672.2 million and is part of the financial services industry. Shares are down 3.3% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates BlackRock Kelso Capital Corporation as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, notable return on equity and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

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 1698.2% when compared to the same quarter one year prior, rising from $1.74 million to $31.33 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, BLACKROCK KELSO CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • BLACKROCK KELSO CAPITAL CORP 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, BLACKROCK KELSO CAPITAL CORP increased its bottom line by earning $1.20 versus $0.78 in the prior year. For the next year, the market is expecting a contraction of 23.3% in earnings ($0.92 versus $1.20).
  • BKCC, with its decline in revenue, slightly underperformed the industry average of 10.4%. Since the same quarter one year prior, revenues fell by 13.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • In its most recent trading session, BKCC 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.

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