3 Buy-Rated Dividend Stocks Taking The Lead: SUNS, HRZN, CODI

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 Senior Capital

Dividend Yield: 8.80%

Solar Senior Capital (NASDAQ: SUNS) shares currently have a dividend yield of 8.80%.

Solar Senior Capital Ltd. is a business development company specializing in investments in leveraged, middle-market companies in the United States. The fund invests in the form of senior secured loans, including first lien, unitranche, and second lien debt instruments. The company has a P/E ratio of 13.19.

The average volume for Solar Senior Capital has been 85,200 shares per day over the past 30 days. Solar Senior Capital has a market cap of $185.6 million and is part of the financial services industry. Shares are down 11.7% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Solar Senior Capital as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, expanding profit margins, good cash flow from operations and growth in earnings per share. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 2.6%. Since the same quarter one year prior, revenues rose by 28.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for SOLAR SENIOR CAPITAL LTD is currently very high, coming in at 74.79%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 69.52% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 180.47% to $13.82 million when compared to the same quarter last year. In addition, SOLAR SENIOR CAPITAL LTD has also vastly surpassed the industry average cash flow growth rate of -96.17%.
  • 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 37.3% when compared to the same quarter one year prior, rising from $2.90 million to $3.99 million.
  • SOLAR SENIOR CAPITAL LTD has improved earnings per share by 34.6% 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, SOLAR SENIOR CAPITAL LTD reported lower earnings of $1.11 versus $1.46 in the prior year. This year, the market expects an improvement in earnings ($1.34 versus $1.11).

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

Horizon Technology Finance

Dividend Yield: 9.80%

Horizon Technology Finance (NASDAQ: HRZN) shares currently have a dividend yield of 9.80%.

Horizon Technology Finance Corporation, a specialty finance company, lends to and invests in development-stage companies in the United States. The company has a P/E ratio of 19.62.

The average volume for Horizon Technology Finance has been 87,600 shares per day over the past 30 days. Horizon Technology Finance has a market cap of $136.0 million and is part of the financial services industry. Shares are up 0.4% year-to-date as of the close of trading on Wednesday.

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

TheStreet Ratings rates Horizon Technology Finance as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, good cash flow from operations, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • HRZN's revenue growth has slightly outpaced the industry average of 2.6%. Since the same quarter one year prior, revenues slightly increased by 2.3%. 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 72.0% when compared to the same quarter one year prior, rising from $2.98 million to $5.13 million.
  • Net operating cash flow has significantly increased by 71.57% to -$5.23 million when compared to the same quarter last year. In addition, HORIZON TECHNOLOGY FINANCE has also vastly surpassed the industry average cash flow growth rate of -96.17%.
  • The gross profit margin for HORIZON TECHNOLOGY FINANCE is rather high; currently it is at 60.45%. Regardless of HRZN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HRZN's net profit margin of 68.09% significantly outperformed against the industry.
  • HORIZON TECHNOLOGY FINANCE 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, HORIZON TECHNOLOGY FINANCE reported lower earnings of $0.37 versus $0.56 in the prior year. This year, the market expects an improvement in earnings ($1.20 versus $0.37).

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

Compass Diversified Holdings

Dividend Yield: 8.10%

Compass Diversified Holdings (NYSE: CODI) shares currently have a dividend yield of 8.10%.

Compass Diversified Holdings is a private equity firm specializing in acquisitions, buyouts, and middle market investments. It seeks to invest in manufacturing, distribution, consumer products, and business services sectors. The firm prefers to invest in companies based in North America. The company has a P/E ratio of 14.57.

The average volume for Compass Diversified Holdings has been 85,800 shares per day over the past 30 days. Compass Diversified Holdings has a market cap of $858.8 million and is part of the conglomerates industry. Shares are down 9.5% year-to-date as of the close of trading on Wednesday.

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

TheStreet Ratings rates Compass Diversified Holdings as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, compelling growth in net income, revenue growth, notable return on equity and reasonable valuation levels. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • COMPASS DIVERSIFIED HOLDINGS 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. We feel that this trend should continue. During the past fiscal year, COMPASS DIVERSIFIED HOLDINGS turned its bottom line around by earning $1.07 versus -$0.05 in the prior year. This year, the market expects an improvement in earnings ($1.16 versus $1.07).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Financial Services industry. The net income increased by 192.3% when compared to the same quarter one year prior, rising from $1.59 million to $4.66 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 11.3%. Since the same quarter one year prior, revenues slightly increased by 1.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 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 Diversified Financial Services industry and the overall market, COMPASS DIVERSIFIED HOLDINGS's return on equity exceeds 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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