Best Of The Buy-Rated Dividend Stocks: Top 3 Companies: TCPC, HRZN, DOM

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: 8.20%

TCP Capital (NASDAQ: TCPC) shares currently have a dividend yield of 8.20%.

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 10.02.

The average volume for TCP Capital has been 442,200 shares per day over the past 30 days. TCP Capital has a market cap of $733.4 million and is part of the financial services industry. Shares are up 5.1% year-to-date as of the close of trading on Friday.

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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, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • TCPC's very impressive revenue growth greatly exceeded the industry average of 3.0%. Since the same quarter one year prior, revenues leaped by 69.9%. 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 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 26.9% when compared to the same quarter one year prior, rising from $9.77 million to $12.40 million.
  • The gross profit margin for TCP CAPITAL CORP is currently very high, coming in at 80.84%. 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 50.44% significantly outperformed against the industry.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
  • 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. When compared to other companies in the Capital Markets industry and the overall market, TCP CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.

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Horizon Technology Finance

Dividend Yield: 9.70%

Horizon Technology Finance (NASDAQ: HRZN) shares currently have a dividend yield of 9.70%.

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 19.72.

The average volume for Horizon Technology Finance has been 79,900 shares per day over the past 30 days. Horizon Technology Finance has a market cap of $136.6 million and is part of the financial services industry. Shares are down 0.1% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Horizon Technology Finance as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, expanding profit margins, good cash flow from operations, increase in stock price during the past year and impressive record of earnings per share growth. 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:
  • 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 112.1% when compared to the same quarter one year prior, rising from $1.15 million to $2.44 million.
  • The gross profit margin for HORIZON TECHNOLOGY FINANCE is rather high; currently it is at 64.35%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.99% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 96.68% to $7.42 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 -89.11%.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
  • 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 ($1.13 versus $0.37).

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Dominion Resources Black Warrior

Dividend Yield: 11.30%

Dominion Resources Black Warrior (NYSE: DOM) shares currently have a dividend yield of 11.30%.

Dominion Resources Black Warrior Trust operates as a grantor trust in the United States. The company has a P/E ratio of 9.17.

The average volume for Dominion Resources Black Warrior has been 177,000 shares per day over the past 30 days. Dominion Resources Black Warrior has a market cap of $54.0 million and is part of the financial services industry. Shares are up 23.5% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Dominion Resources Black Warrior 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, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • DOM 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.
  • 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, DOMINION RES BLACK WARRIOR's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for DOMINION RES BLACK WARRIOR is currently very high, coming in at 100.00%. DOM has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, DOM's net profit margin of 77.67% 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. 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.
  • DOMINION RES BLACK WARRIOR's earnings per share declined by 5.9% 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, DOMINION RES BLACK WARRIOR increased its bottom line by earning $0.70 versus $0.54 in the prior year. This year, the market expects an improvement in earnings ($3.52 versus $0.70).

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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