Buy-Rated Dividend Stocks In The Top 3: MAIN, RDS.B, HTGC

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."

Main Street Capital Corporation

Dividend Yield: 6.30%

Main Street Capital Corporation (NYSE: MAIN) shares currently have a dividend yield of 6.30%.

Main Street Capital Corporation is a business development company specializing in long- term equity, equity related, and debt investments in small and lower middle market companies. The company has a P/E ratio of 15.88.

The average volume for Main Street Capital Corporation has been 318,200 shares per day over the past 30 days. Main Street Capital Corporation has a market cap of $1.5 billion and is part of the financial services industry. Shares are down 0.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Main Street Capital Corporation as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income, 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 somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 25.4%. 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 24.8% when compared to the same quarter one year prior, going from $24.00 million to $29.95 million.
  • Net operating cash flow has slightly increased to -$119.72 million or 8.53% when compared to the same quarter last year. In addition, MAIN STREET CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -89.11%.
  • The gross profit margin for MAIN STREET CAPITAL CORP is currently very high, coming in at 83.30%. Regardless of MAIN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MAIN's net profit margin of 85.87% 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.

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Royal Dutch Shell

Dividend Yield: 4.40%

Royal Dutch Shell (NYSE: RDS.B) shares currently have a dividend yield of 4.40%.

Royal Dutch Shell plc operates as an independent oil and gas company worldwide. The company explores for and extracts crude oil, natural gas, and natural gas liquids. The company has a P/E ratio of 10.74.

The average volume for Royal Dutch Shell has been 500,000 shares per day over the past 30 days. Royal Dutch Shell has a market cap of $270.8 billion and is part of the energy industry. Shares are up 12.1% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates Royal Dutch Shell as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, attractive valuation levels, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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 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 205.5% when compared to the same quarter one year prior, rising from $1,737.00 million to $5,307.00 million.
  • RDS.B's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.85 is somewhat weak and could be cause for future problems.
  • ROYAL DUTCH SHELL PLC 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, ROYAL DUTCH SHELL PLC reported lower earnings of $5.18 versus $8.52 in the prior year. This year, the market expects an improvement in earnings ($15.30 versus $5.18).

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

Hercules Technology Growth Capital

Dividend Yield: 8.10%

Hercules Technology Growth Capital (NYSE: HTGC) shares currently have a dividend yield of 8.10%.

Hercules Technology Growth Capital, Inc. is a private equity, venture capital, and venture debt firm specializing in providing capital to privately held venture capital and private equity backed companies and select publicly-traded companies. The company has a P/E ratio of 9.21.

The average volume for Hercules Technology Growth Capital has been 585,600 shares per day over the past 30 days. Hercules Technology Growth Capital has a market cap of $967.1 million and is part of the real estate industry. Shares are down 6.8% year-to-date as of the close of trading on Tuesday.

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 Hercules Technology Growth Capital as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, 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:
  • 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, HERCULES TECH GROWTH CAP INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for HERCULES TECH GROWTH CAP INC is currently very high, coming in at 83.24%. Regardless of HTGC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HTGC's net profit margin of 38.79% significantly outperformed against the industry.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.0%. Since the same quarter one year prior, revenues slightly dropped by 1.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • In its most recent trading session, HTGC 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.
  • HERCULES TECH GROWTH CAP INC's earnings per share declined by 41.2% 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, HERCULES TECH GROWTH CAP INC increased its bottom line by earning $1.62 versus $0.92 in the prior year. For the next year, the market is expecting a contraction of 25.9% in earnings ($1.20 versus $1.62).

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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