What To Buy: Top 3 Buy-Rated Dividend Stocks: PFLT, PNNT, SJT

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."

PennantPark Floating Rate Capital

Dividend Yield: 7.60%

PennantPark Floating Rate Capital (NASDAQ: PFLT) shares currently have a dividend yield of 7.60%.

PennantPark Floating Rate Capital Ltd. is a business development company. It seeks to make secondary direct, debt, equity, and loan investments. The fund seeks to invest through floating rate loans in private or thinly traded or small market-cap, public middle market companies. The company has a P/E ratio of 8.52.

The average volume for PennantPark Floating Rate Capital has been 73,500 shares per day over the past 30 days. PennantPark Floating Rate Capital has a market cap of $210.8 million and is part of the financial services industry. Shares are up 3.6% year-to-date as of the close of trading on Tuesday.

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TheStreet Ratings rates PennantPark Floating Rate 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, good cash flow from operations, expanding profit margins and increase in stock price during the past year. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • PFLT's very impressive revenue growth greatly exceeded the industry average of 2.5%. Since the same quarter one year prior, revenues leaped by 64.2%. 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 215.4% when compared to the same quarter one year prior, rising from $1.57 million to $4.94 million.
  • Net operating cash flow has significantly increased by 153.15% to $27.18 million when compared to the same quarter last year. In addition, PENNANTPARK FLOATING RT CAP has also vastly surpassed the industry average cash flow growth rate of -89.07%.
  • The gross profit margin for PENNANTPARK FLOATING RT CAP is rather high; currently it is at 68.48%. Regardless of PFLT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PFLT's net profit margin of 64.44% significantly outperformed against the industry.
  • 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, PENNANTPARK FLOATING RT CAP's return on equity is below 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.

Pennant Park Investment Corporation

Dividend Yield: 10.00%

Pennant Park Investment Corporation (NASDAQ: PNNT) shares currently have a dividend yield of 10.00%.

PennantPark Investment Corporation is a publicly listed business development firm specializing in direct and mezzanine investments in middle market companies. It invests in the form of mezzanine debt, senior secured loans, and equity investments. The company has a P/E ratio of 8.01.

The average volume for Pennant Park Investment Corporation has been 644,200 shares per day over the past 30 days. Pennant Park Investment Corporation has a market cap of $747.2 million and is part of the financial services industry. Shares are down 2.5% 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 Pennant Park Investment Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, compelling growth in net income, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • PNNT's revenue growth has slightly outpaced the industry average of 2.5%. Since the same quarter one year prior, revenues slightly increased by 5.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market, PENNANTPARK INVESTMENT CORP's return on equity 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 Capital Markets industry. The net income increased by 131.8% when compared to the same quarter one year prior, rising from $13.79 million to $31.95 million.
  • Net operating cash flow has increased to $84.79 million or 14.21% when compared to the same quarter last year. In addition, PENNANTPARK INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of -89.07%.
  • The gross profit margin for PENNANTPARK INVESTMENT CORP is rather high; currently it is at 62.24%. Regardless of PNNT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PNNT's net profit margin of 90.06% 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.

San Juan Basin Royalty

Dividend Yield: 7.10%

San Juan Basin Royalty (NYSE: SJT) shares currently have a dividend yield of 7.10%.

San Juan Basin Royalty Trust operates as an express trust. The company has a 75% net overriding royalty interest carved out of Burlington's oil and gas leasehold interests (the underlying properties) in properties located in the San Juan Basin in northwestern New Mexico. The company has a P/E ratio of 15.09.

The average volume for San Juan Basin Royalty has been 80,600 shares per day over the past 30 days. San Juan Basin Royalty has a market cap of $893.5 million and is part of the energy industry. Shares are up 12.7% 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 San Juan Basin Royalty as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, increase in stock price during the past year and compelling growth in net income. 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:
  • SJT's very impressive revenue growth greatly exceeded the industry average of 3.1%. Since the same quarter one year prior, revenues leaped by 190.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SJT 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 this, the company maintains a quick ratio of 2.54, which clearly demonstrates the ability to cover short-term cash needs.
  • 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, SAN JUAN BASIN ROYALTY TR's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 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. 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.
  • 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 219.9% when compared to the same quarter one year prior, rising from $5.54 million to $17.71 million.

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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