What To Buy: Top 3 Buy-Rated Dividend Stocks: USAC, TCAP, PFLT

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."

USA Compression Partners

Dividend Yield: 10.00%

USA Compression Partners (NYSE: USAC) shares currently have a dividend yield of 10.00%.

USA Compression Partners, LP provides natural gas compression services under term contracts with customers in the oil and gas industry in the United States. It engineers, designs, operates, services, and repairs its compression units and maintains related support inventory and equipment. The company has a P/E ratio of 27.89.

The average volume for USA Compression Partners has been 65,800 shares per day over the past 30 days. USA Compression Partners has a market cap of $663.0 million and is part of the energy industry. Shares are up 16.3% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates USA Compression Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and good cash flow from operations. 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 1.8%. Since the same quarter one year prior, revenues rose by 29.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • USA COMPRESSION PRTNRS LP 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. We feel that this trend should continue. During the past fiscal year, USA COMPRESSION PRTNRS LP increased its bottom line by earning $0.58 versus $0.32 in the prior year. This year, the market expects an improvement in earnings ($0.60 versus $0.58).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 192.6% when compared to the same quarter one year prior, rising from $3.92 million to $11.46 million.
  • The gross profit margin for USA COMPRESSION PRTNRS LP is currently very high, coming in at 70.44%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.62% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $14.51 million or 44.13% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 12.20%.

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Triangle Capital Corporation

Dividend Yield: 9.10%

Triangle Capital Corporation (NYSE: TCAP) shares currently have a dividend yield of 9.10%.

Triangle Capital Corporation is a business development company specializing in private equity and mezzanine investments. The company has a P/E ratio of 11.80.

The average volume for Triangle Capital Corporation has been 112,200 shares per day over the past 30 days. Triangle Capital Corporation has a market cap of $788.1 million and is part of the financial services industry. Shares are up 17.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Triangle Capital Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. 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 came in higher than the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 28.0%. 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.
  • Net operating cash flow has significantly increased by 149.76% to $10.67 million when compared to the same quarter last year. Despite an increase in cash flow, TRIANGLE CAPITAL CORP's cash flow growth rate is still lower than the industry average growth rate of 191.30%.
  • The gross profit margin for TRIANGLE CAPITAL CORP is currently very high, coming in at 78.68%. Regardless of TCAP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TCAP's net profit margin of 27.14% compares favorably to the industry average.
  • TRIANGLE CAPITAL CORP's earnings per share declined by 44.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, TRIANGLE CAPITAL CORP reported lower earnings of $1.04 versus $2.94 in the prior year. This year, the market expects an improvement in earnings ($2.12 versus $1.04).
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Capital Markets industry average. The net income has significantly decreased by 33.2% when compared to the same quarter one year ago, falling from $12.50 million to $8.35 million.

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PennantPark Floating Rate Capital

Dividend Yield: 8.10%

PennantPark Floating Rate Capital (NASDAQ: PFLT) shares currently have a dividend yield of 8.10%.

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 10.20.

The average volume for PennantPark Floating Rate Capital has been 49,200 shares per day over the past 30 days. PennantPark Floating Rate Capital has a market cap of $209.6 million and is part of the financial services industry. Shares are up 3.8% year-to-date as of the close of trading on Friday.

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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 revenue growth, expanding profit margins, good cash flow from operations and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.7%. Since the same quarter one year prior, revenues slightly increased by 4.7%. 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 PENNANTPARK FLOATING RT CAP is rather high; currently it is at 65.54%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 76.72% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 171.73% to $21.67 million when compared to the same quarter last year. Despite an increase in cash flow, PENNANTPARK FLOATING RT CAP's cash flow growth rate is still lower than the industry average growth rate of 191.30%.
  • In its most recent trading session, PFLT 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.
  • PENNANTPARK FLOATING RT CAP's earnings per share declined by 16.3% 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, PENNANTPARK FLOATING RT CAP increased its bottom line by earning $1.38 versus $1.30 in the prior year. For the next year, the market is expecting a contraction of 6.5% in earnings ($1.29 versus $1.38).

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