Best 3 Yielding Buy-Rated Stocks: TAXI, KCAP, FDUS

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."

Medallion Financial

Dividend Yield: 8.40%

Medallion Financial (NASDAQ: TAXI) shares currently have a dividend yield of 8.40%.

Medallion Financial Corp., through its subsidiaries, operates as a specialty finance company in the United States. The company is engaged in originating, acquiring, and servicing loans that finance taxicab medallions and various types of commercial businesses. The company has a P/E ratio of 10.10.

The average volume for Medallion Financial has been 363,600 shares per day over the past 30 days. Medallion Financial has a market cap of $287.1 million and is part of the financial services industry. Shares are down 20.5% year-to-date as of the close of trading on Thursday.

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 Medallion Financial as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and increase in net income. 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:
  • The revenue growth came in higher than the industry average of 2.6%. Since the same quarter one year prior, revenues rose by 26.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • 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 13.7% when compared to the same quarter one year prior, going from $6.25 million to $7.10 million.
  • The gross profit margin for MEDALLION FINANCIAL CORP is rather high; currently it is at 58.97%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 71.16% significantly outperformed against the industry average.
  • 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 on the basis of return on equity, MEDALLION FINANCIAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • TAXI has underperformed the S&P 500 Index, declining 22.89% from its price level of one year ago. 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.

KCAP Financial

Dividend Yield: 12.50%

KCAP Financial (NASDAQ: KCAP) shares currently have a dividend yield of 12.50%.

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 15.98.

The average volume for KCAP Financial has been 325,900 shares per day over the past 30 days. KCAP Financial has a market cap of $269.4 million and is part of the financial services industry. Shares are down 1% year-to-date as of the close of trading on Thursday.

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 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 good 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:
  • The revenue growth came in higher than the industry average of 2.6%. Since the same quarter one year prior, revenues rose by 17.5%. 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 KCAP FINANCIAL INC is currently very high, coming in at 81.05%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 25.71% is above that of the industry average.
  • Net operating cash flow has significantly increased by 125.25% to $9.86 million when compared to the same quarter last year. In addition, KCAP FINANCIAL INC has also vastly surpassed the industry average cash flow growth rate of -96.17%.
  • 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. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, KCAP FINANCIAL INC reported lower earnings of $0.53 versus $0.91 in the prior year. This year, the market expects an improvement in earnings ($0.98 versus $0.53).
  • The share price of KCAP FINANCIAL INC has not done very well: it is down 10.88% 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.

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 8.27.

The average volume for Fidus Investment has been 121,600 shares per day over the past 30 days. Fidus Investment has a market cap of $250.7 million and is part of the financial services industry. Shares are down 16.3% year-to-date as of the close of trading on Thursday.

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 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 2.6%. Since the same quarter one year prior, revenues slightly increased by 7.6%. 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 rather high; currently it is at 68.33%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 31.99% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 72.18% to -$4.76 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 -96.17%.
  • 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 30.6% 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 20.9% in earnings ($1.59 versus $2.01).

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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