Top 3 Yielding Buy-Rated Stocks: TAXI, PBT, 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: 8.00%

Medallion Financial (NASDAQ: TAXI) shares currently have a dividend yield of 8.00%.

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 10.59.

The average volume for Medallion Financial has been 359,300 shares per day over the past 30 days. Medallion Financial has a market cap of $301.2 million and is part of the financial services industry. Shares are down 18.1% year-to-date as of the close of trading on Friday.

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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 disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 2.8%. 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.
  • TAXI has underperformed the S&P 500 Index, declining 15.77% 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.
  • MEDALLION FINANCIAL CORP reported flat earnings per share in the most recent quarter. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, MEDALLION FINANCIAL CORP reported lower earnings of $1.16 versus $1.21 in the prior year. For the next year, the market is expecting a contraction of 1.7% in earnings ($1.14 versus $1.16).

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

Permian Basin Royalty

Dividend Yield: 9.40%

Permian Basin Royalty (NYSE: PBT) shares currently have a dividend yield of 9.40%.

Permian Basin Royalty Trust owns overriding royalty interests in various oil and gas properties in the United States. The company has a P/E ratio of 13.33.

The average volume for Permian Basin Royalty has been 149,900 shares per day over the past 30 days. Permian Basin Royalty has a market cap of $652.5 million and is part of the energy industry. Shares are up 8.3% year-to-date as of the close of trading on Friday.

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 Permian Basin Royalty as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, increase in net income and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:
  • PBT's very impressive revenue growth greatly exceeded the industry average of 2.4%. Since the same quarter one year prior, revenues leaped by 72.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • PBT 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.15, which illustrates the ability to avoid short-term cash problems.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, PERMIAN BASIN ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 74.7% when compared to the same quarter one year prior, rising from $6.70 million to $11.70 million.
  • The gross profit margin for PERMIAN BASIN ROYALTY TRUST is currently very high, coming in at 100.00%. PBT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, PBT's net profit margin of 96.41% significantly outperformed against the industry.

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: 8.00%

Fidus Investment (NASDAQ: FDUS) shares currently have a dividend yield of 8.00%.

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 8.62.

The average volume for Fidus Investment has been 119,200 shares per day over the past 30 days. Fidus Investment has a market cap of $261.3 million and is part of the financial services industry. Shares are down 14.3% year-to-date as of the close of trading on Friday.

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 2.8%. 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 -89.49%.
  • 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 19.9% in earnings ($1.61 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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