3 Buy-Rated Dividend Stocks Taking The Lead: DDC, CPLP, TCRD

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

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."

Dominion Diamond

Dividend Yield: 8.50%

Dominion Diamond (NYSE: DDC) shares currently have a dividend yield of 8.50%.

Dominion Diamond Corporation engages in the mining and marketing of rough diamonds. It operates through Diavik Diamond Mine and Ekati Diamond Mine segments. The company has a P/E ratio of 24.52.

The average volume for Dominion Diamond has been 350,100 shares per day over the past 30 days. Dominion Diamond has a market cap of $1.6 billion and is part of the metals & mining industry. Shares are up 4.3% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Dominion Diamond 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, solid stock price performance, reasonable valuation levels and increase 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:
  • The revenue growth came in higher than the industry average of 17.3%. Since the same quarter one year prior, revenues slightly increased by 3.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • DDC's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, DDC has a quick ratio of 2.14, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Powered by its strong earnings growth of 88.88% and other important driving factors, this stock has surged by 46.58% 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, DDC 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 Metals & Mining industry. The net income increased by 93.0% when compared to the same quarter one year prior, rising from -$7.80 million to -$0.55 million.

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Capital Product Partners

Dividend Yield: 10.70%

Capital Product Partners (NASDAQ: CPLP) shares currently have a dividend yield of 10.70%.

Capital Product Partners L.P., a shipping company, provides marine transportation services in Greece. The company has a P/E ratio of 27.34.

The average volume for Capital Product Partners has been 642,400 shares per day over the past 30 days. Capital Product Partners has a market cap of $910.7 million and is part of the transportation industry. Shares are up 9.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Capital Product Partners 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, increase in net income, expanding profit margins and growth in earnings per share. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 38.5%. Since the same quarter one year prior, revenues slightly increased by 3.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.69, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, CPLP has a quick ratio of 2.27, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 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 8.1% when compared to the same quarter one year prior, going from $11.24 million to $12.15 million.
  • The gross profit margin for CAPITAL PRODUCT PARTNERS LP is rather high; currently it is at 65.43%. Regardless of CPLP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CPLP's net profit margin of 24.85% significantly outperformed against the industry.
  • CAPITAL PRODUCT PARTNERS LP has improved earnings per share by 12.5% 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, CAPITAL PRODUCT PARTNERS LP reported lower earnings of $0.31 versus $0.99 in the prior year. This year, the market expects an improvement in earnings ($0.43 versus $0.31).

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THL Credit

Dividend Yield: 10.80%

THL Credit (NASDAQ: TCRD) shares currently have a dividend yield of 10.80%.

THL Credit, Inc. is a business development company specializing in direct and fund of fund investments. The fund seeks to invest in debt and equity securities of middle market companies. The company has a P/E ratio of 10.02.

The average volume for THL Credit has been 158,000 shares per day over the past 30 days. THL Credit has a market cap of $427.9 million and is part of the financial services industry. Shares are up 7.3% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates THL Credit as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, increase in net income, growth in earnings per share and good cash flow from operations. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • TCRD's revenue growth has slightly outpaced the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 13.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for THL CREDIT INC is rather high; currently it is at 65.70%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 65.49% significantly outperformed against the industry average.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Capital Markets industry average. The net income increased by 41.7% when compared to the same quarter one year prior, rising from $10.98 million to $15.56 million.
  • Net operating cash flow has significantly increased by 159.26% to $49.43 million when compared to the same quarter last year. Despite an increase in cash flow, THL CREDIT INC's cash flow growth rate is still lower than the industry average growth rate of 189.33%.
  • THL CREDIT INC has improved earnings per share by 43.8% 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, THL CREDIT INC reported lower earnings of $1.07 versus $1.45 in the prior year. This year, the market expects an improvement in earnings ($1.39 versus $1.07).

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