3 Buy-Rated Dividend Stocks Leading The Pack: SLRC, FDUS, PFLT

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 Capital

Dividend Yield: 8.30%

Solar Capital (NASDAQ: SLRC) shares currently have a dividend yield of 8.30%.

Solar Capital Ltd. is a business development company specializing in investments in leveraged middle market companies. The company has a P/E ratio of 24.54.

The average volume for Solar Capital has been 125,800 shares per day over the past 30 days. Solar Capital has a market cap of $819.2 million and is part of the financial services industry. Shares are up 18.3% year-to-date as of the close of trading on Friday.

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

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 24.3%. Since the same quarter one year prior, revenues rose by 32.8%. 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 158.5% when compared to the same quarter one year prior, rising from $10.90 million to $28.18 million.
  • Net operating cash flow has significantly increased by 95.70% to -$1.02 million when compared to the same quarter last year. In addition, SOLAR CAPITAL LTD has also vastly surpassed the industry average cash flow growth rate of -146.35%.
  • The gross profit margin for SOLAR CAPITAL LTD is rather high; currently it is at 64.46%. Regardless of SLRC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SLRC's net profit margin of 82.79% significantly outperformed against the industry.
  • 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, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

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Fidus Investment

Dividend Yield: 9.90%

Fidus Investment (NASDAQ: FDUS) shares currently have a dividend yield of 9.90%.

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 7.07.

The average volume for Fidus Investment has been 74,100 shares per day over the past 30 days. Fidus Investment has a market cap of $255.9 million and is part of the financial services industry. Shares are up 14.3% 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, growth in earnings per share, compelling growth in net income, expanding profit margins and good cash flow from operations. 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:
  • The revenue growth greatly exceeded the industry average of 24.3%. Since the same quarter one year prior, revenues rose by 14.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • FIDUS INVESTMENT CORP has improved earnings per share by 15.0% 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 year. We feel that this trend should continue. During the past fiscal year, FIDUS INVESTMENT CORP increased its bottom line by earning $1.61 versus $1.34 in the prior year. This year, the market expects an improvement in earnings ($1.62 versus $1.61).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Capital Markets industry average. The net income increased by 17.6% when compared to the same quarter one year prior, going from $6.41 million to $7.54 million.
  • The gross profit margin for FIDUS INVESTMENT CORP is rather high; currently it is at 66.07%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 51.32% significantly outperformed against the industry average.
  • Net operating cash flow has increased to -$8.43 million or 34.30% when compared to the same quarter last year. In addition, FIDUS INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of -146.35%.

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PennantPark Floating Rate Capital

Dividend Yield: 9.00%

PennantPark Floating Rate Capital (NASDAQ: PFLT) shares currently have a dividend yield of 9.00%.

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 9.17.

The average volume for PennantPark Floating Rate Capital has been 79,600 shares per day over the past 30 days. PennantPark Floating Rate Capital has a market cap of $338.4 million and is part of the financial services industry. Shares are up 12.9% 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 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 greatly exceeded the industry average of 24.3%. Since the same quarter one year prior, revenues rose by 42.1%. 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 PENNANTPARK FLOATING RT CAP is currently very high, coming in at 73.92%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 21.46% is above that of the industry average.
  • PENNANTPARK FLOATING RT CAP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, PENNANTPARK FLOATING RT CAP reported lower earnings of $0.82 versus $1.38 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus $0.82).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Capital Markets industry. The net income has significantly decreased by 60.2% when compared to the same quarter one year ago, falling from $6.13 million to $2.44 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness 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.

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