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."

Solar Senior Capital

Dividend Yield: 9.10%

Solar Senior Capital (NASDAQ: SUNS) shares currently have a dividend yield of 9.10%.

Solar Senior Capital Ltd. is a business development company specializing in investments in leveraged, middle-market companies in the United States. The fund invests in the form of senior secured loans, including first lien, unitranche, and second lien debt instruments. The company has a P/E ratio of 15.43.

The average volume for Solar Senior Capital has been 29,200 shares per day over the past 30 days. Solar Senior Capital has a market cap of $179.7 million and is part of the financial services industry. Shares are up 3.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Solar Senior Capital as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and increase in net income. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • SUNS's revenue growth has slightly outpaced the industry average of 6.8%. Since the same quarter one year prior, revenues slightly increased by 7.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • The gross profit margin for SOLAR SENIOR CAPITAL LTD is currently very high, coming in at 76.64%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 66.51% significantly outperformed against the industry average.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Capital Markets industry average. The net income increased by 2.5% when compared to the same quarter one year prior, going from $3.99 million to $4.09 million.
  • SOLAR SENIOR CAPITAL LTD reported flat earnings per share in the most recent quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, SOLAR SENIOR CAPITAL LTD reported lower earnings of $1.02 versus $1.11 in the prior year. This year, the market expects an improvement in earnings ($1.36 versus $1.02).
  • In its most recent trading session, SUNS 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. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

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Fidus Investment

Dividend Yield: 10.70%

Fidus Investment (NASDAQ: FDUS) shares currently have a dividend yield of 10.70%.

Fidus Investment Corporation operates as an externally managed, closed-end, and non-diversified management investment company. The company provides customized debt and equity financing solutions to lower middle-market companies in the United States. The company has a P/E ratio of 6.41.

The average volume for Fidus Investment has been 46,200 shares per day over the past 30 days. Fidus Investment has a market cap of $230.3 million and is part of the financial services industry. Shares are down 5.6% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Fidus Investment as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, 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 came in higher than the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 21.6%. 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 89.7% when compared to the same quarter one year prior, rising from $3.38 million to $6.41 million.
  • The gross profit margin for FIDUS INVESTMENT CORP is rather high; currently it is at 65.03%. Regardless of FDUS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FDUS's net profit margin of 49.92% significantly outperformed against the industry.
  • FIDUS INVESTMENT CORP 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, FIDUS INVESTMENT CORP reported lower earnings of $1.34 versus $2.01 in the prior year. This year, the market expects an improvement in earnings ($1.62 versus $1.34).
  • FDUS has underperformed the S&P 500 Index, declining 20.14% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

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PennantPark Floating Rate Capital

Dividend Yield: 8.40%

PennantPark Floating Rate Capital (NASDAQ: PFLT) shares currently have a dividend yield of 8.40%.

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 9.86.

The average volume for PennantPark Floating Rate Capital has been 56,100 shares per day over the past 30 days. PennantPark Floating Rate Capital has a market cap of $202.6 million and is part of the financial services industry. Shares are down 1.9% 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 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:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.8%. 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. In addition, PENNANTPARK FLOATING RT CAP has also vastly surpassed the industry average cash flow growth rate of -505.86%.
  • 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).
  • The change in net income from the same quarter one year ago has exceeded that of the Capital Markets industry average, but is less than that of the S&P 500. The net income has decreased by 15.4% when compared to the same quarter one year ago, dropping from $7.24 million to $6.13 million.

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