It's pretty simple, once you know how to do it.
First of all highlight the word (makes sense):

Hit the shift key and you'll see your selected word in the suggested words but with a capital letter at the beginning:

Double-tap the shift key to switch to capslock
Now you'll see a suggestion with the highlighted world in all uppercase:

Also, if you want to switch the word to lowercase just select a word and in the QuickType suggestions you'll see the word in lowercase (when the shift key is off).
Thanks to this Reddit user who discovered this tip.