3 Buy-Rated Dividend Stocks: MTR, BKCC, EDUC

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."

Mesa Royalty

Dividend Yield: 9.40%

Mesa Royalty (NYSE: MTR) shares currently have a dividend yield of 9.40%.

Mesa Royalty Trust holds net overriding royalty interests in various oil and gas properties in the United States. It has interests in properties located in the Hugoton field of Kansas; the San Juan Basin field of New Mexico and Colorado; and the Yellow Creek field of Wyoming. The company has a P/E ratio of 8.76.

The average volume for Mesa Royalty has been 18,900 shares per day over the past 30 days. Mesa Royalty has a market cap of $55.8 million and is part of the financial services industry. Shares are up 40% year-to-date as of the close of trading on Wednesday.

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 Mesa 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, solid stock price performance and compelling growth in net income. 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:
  • MTR's very impressive revenue growth greatly exceeded the industry average of 6.4%. Since the same quarter one year prior, revenues leaped by 260.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • MTR 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 2.79, 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, MESA ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Powered by its strong earnings growth of 274.28% and other important driving factors, this stock has surged by 40.08% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MTR should continue to move higher despite the fact that it has already enjoyed a very nice gain 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 273.8% when compared to the same quarter one year prior, rising from $0.65 million to $2.44 million.

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

BlackRock Kelso Capital Corporation

Dividend Yield: 9.40%

BlackRock Kelso Capital Corporation (NASDAQ: BKCC) shares currently have a dividend yield of 9.40%.

BlackRock Kelso Capital Corporation is Business Development Company specializing in investments in middle market companies. The fund invests in all industries. The company has a P/E ratio of 6.27.

The average volume for BlackRock Kelso Capital Corporation has been 378,200 shares per day over the past 30 days. BlackRock Kelso Capital Corporation has a market cap of $667.9 million and is part of the financial services industry. Shares are down 4% year-to-date as of the close of trading on Wednesday.

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 BlackRock Kelso Capital Corporation as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, notable return on equity, good cash flow from operations, expanding profit margins and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

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 156.7% when compared to the same quarter one year prior, rising from $12.02 million to $30.87 million.
  • 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, BLACKROCK KELSO CAPITAL CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 273.87% to $193.65 million when compared to the same quarter last year. In addition, BLACKROCK KELSO CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -193.96%.
  • The gross profit margin for BLACKROCK KELSO CAPITAL CORP is rather high; currently it is at 66.84%. Regardless of BKCC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BKCC's net profit margin of 91.42% significantly outperformed against the industry.
  • BLACKROCK KELSO CAPITAL CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, BLACKROCK KELSO CAPITAL CORP increased its bottom line by earning $1.20 versus $0.78 in the prior year. For the next year, the market is expecting a contraction of 33.3% in earnings ($0.80 versus $1.20).

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

Educational Development

Dividend Yield: 7.60%

Educational Development (NASDAQ: EDUC) shares currently have a dividend yield of 7.60%.

Educational Development Corporation operates as a trade publisher of the line of educational children's books in the United States. The company has a P/E ratio of 35.00.

The average volume for Educational Development has been 7,200 shares per day over the past 30 days. Educational Development has a market cap of $16.8 million and is part of the media industry. Shares are up 36.8% year-to-date as of the close of trading on Wednesday.

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 Educational Development as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. 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:
  • EDUC's revenue growth has slightly outpaced the industry average of 12.3%. Since the same quarter one year prior, revenues rose by 19.1%. 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 EDUCATIONAL DEVELOPMENT CORP is rather high; currently it is at 55.74%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -0.05% trails the industry average.
  • EDUC's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that EDUC's debt-to-equity ratio is low, the quick ratio, which is currently 0.62, displays a potential problem in covering short-term cash needs.
  • Compared to its closing price of one year ago, EDUC's share price has jumped by 47.55%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • 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 Distributors industry and the overall market, EDUCATIONAL DEVELOPMENT CORP's return on equity significantly trails 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.

Other helpful dividend tools from TheStreet:

null

More from Markets

Stocks Are Lower as Dow Heads for Eighth Straight Drop

Stocks Are Lower as Dow Heads for Eighth Straight Drop

Video: Here's Why One Markets Pro Is Raising Cash Right Now

Video: Here's Why One Markets Pro Is Raising Cash Right Now

Mesoblast Soars on Stem-Cell Treatment Data

Mesoblast Soars on Stem-Cell Treatment Data

Trade Tussle Sinks Stocks, Oil Slides, Micron, Daimler - 5 Things You Must Know

Trade Tussle Sinks Stocks, Oil Slides, Micron, Daimler - 5 Things You Must Know

Bank of England Holds Rates Steady, But Vote Shift Signals Hawkish Tone

Bank of England Holds Rates Steady, But Vote Shift Signals Hawkish Tone