Convertible bonds offer an interesting middle ground between a stock and a bond and, thus, an interesting middle ground between risk and reward. In others words, convertible bonds can provide more upside potential than “non-convertible,” straight bonds (because of the ability to convert the security into equity) and more downside protection than stocks (because of the fixed-income nature of the security).

For investors seeking a high level of income, high-yielding convertibles might be a good option. Of course, a high yield often means increased risk. High-coupon convertibles are often issued by companies with questionable financial strength. High-yielding convertibles often trade below par and are referred to as being “busted.” As such, they provide only minimal exposure to the upside of the underlying stock.

Still, because of the bond component, so-called “busted” convertible securities are higher up on a corporation’s ownership chain than stocks, providing more safety than an equity investment in the event a bankruptcy. Moreover, assuming the financial condition of the issuing company improves, there is likely to be more upside potential in a convertible than in a straight bond issued by the same company. And, if performance improves enough, the convertible’s value could rise above par, allowing it to reflect more of the stock’s price performance.

Below is an abbreviated list of convertible bonds with coupon rates of 7% and higher in our survey. The list contains both “busted” convertibles and those trading above par value. Convertibles trading above par will offer more meaningful exposure to the fluctuations in the common stock of the issuing company, while providing decent income for above-average total returns.

*Prices as of August 30, 2012

At the time of this article's writing, the author did not have positions in any of the securities mentioned.