Best 3 Yielding Buy-Rated Stocks: TCPC, DMLP, PFLT

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."

TCP Capital

Dividend Yield: 8.90%

TCP Capital (NASDAQ: TCPC) shares currently have a dividend yield of 8.90%.

TCP Capital Corp. is a business development company specializing in direct equity and debt investments in middle-market, senior secured loans, junior loans, originated loans, mezzanine, senior debt instruments, bonds, and secondary-market investments. It seeks to invest in the United States. The company has a P/E ratio of 8.43.

The average volume for TCP Capital has been 327,300 shares per day over the past 30 days. TCP Capital has a market cap of $582.8 million and is part of the financial services industry. Shares are down 4.5% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates TCP Capital 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, impressive record of earnings per share growth 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 greatly exceeded the industry average of 7.9%. Since the same quarter one year prior, revenues rose by 22.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 102.2% when compared to the same quarter one year prior, rising from $7.32 million to $14.80 million.
  • The gross profit margin for TCP CAPITAL CORP is currently very high, coming in at 77.18%. Regardless of TCPC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TCPC's net profit margin of 70.50% significantly outperformed against the industry.
  • TCP CAPITAL CORP has improved earnings per share by 43.8% 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 year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, TCP CAPITAL CORP increased its bottom line by earning $1.94 versus $1.20 in the prior year. For the next year, the market is expecting a contraction of 18.8% in earnings ($1.58 versus $1.94).
  • In its most recent trading session, TCPC 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. 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.

Dorchester Minerals

Dividend Yield: 7.20%

Dorchester Minerals (NASDAQ: DMLP) shares currently have a dividend yield of 7.20%.

Dorchester Minerals, L.P. is engaged in the acquisition, ownership, and administration of producing and nonproducing crude oil and natural gas royalty, net profits, and leasehold interests in the United States. The company has a P/E ratio of 20.00.

The average volume for Dorchester Minerals has been 38,600 shares per day over the past 30 days. Dorchester Minerals has a market cap of $840.5 million and is part of the financial services industry. Shares are up 6% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Dorchester Minerals 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, good cash flow from operations, expanding profit margins 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:
  • DMLP 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 this, the company maintains a quick ratio of 29.68, which clearly demonstrates the ability to cover short-term cash needs.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, DORCHESTER MINERALS -LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $13.89 million or 12.12% when compared to the same quarter last year. In addition, DORCHESTER MINERALS -LP has also modestly surpassed the industry average cash flow growth rate of 5.61%.
  • The gross profit margin for DORCHESTER MINERALS -LP is currently very high, coming in at 92.94%. Regardless of DMLP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DMLP's net profit margin of 69.53% significantly outperformed against the industry.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over 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.

PennantPark Floating Rate Capital

Dividend Yield: 7.80%

PennantPark Floating Rate Capital (NASDAQ: PFLT) shares currently have a dividend yield of 7.80%.

PennantPark Floating Rate Capital Ltd. is a business development company. It seeks to make secondary direct, debt, equity, and loan investments. The fund seeks to invest through floating rate loans in private or thinly traded or small market-cap, public middle market companies. The company has a P/E ratio of 9.83.

The average volume for PennantPark Floating Rate Capital has been 75,400 shares per day over the past 30 days. PennantPark Floating Rate Capital has a market cap of $205.0 million and is part of the financial services industry. Shares are up 0.4% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates PennantPark Floating Rate Capital as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income 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:
  • PFLT's very impressive revenue growth greatly exceeded the industry average of 7.9%. Since the same quarter one year prior, revenues leaped by 72.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 243.2% when compared to the same quarter one year prior, rising from $1.77 million to $6.06 million.
  • The gross profit margin for PENNANTPARK FLOATING RT CAP is rather high; currently it is at 57.92%. Regardless of PFLT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PFLT's net profit margin of 88.50% significantly outperformed against the industry.
  • PENNANTPARK FLOATING RT CAP 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PENNANTPARK FLOATING RT CAP reported lower earnings of $1.30 versus $1.75 in the prior year. For the next year, the market is expecting a contraction of 16.1% in earnings ($1.09 versus $1.30).
  • In its most recent trading session, PFLT 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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