Prospect Capital: I Am Now Aggressively Acquiring This 12% Yielding BDC Upgrade PSEC

Many preferred issues yield 6% or more and offer investors good dividend security since they are a senior form of equity. The discount represents a high margin of safety and I think that passive income investors with a stomach for volatility might want to consider Prospect Capital. I don’t plan to hold Prospect Capital forever and my past criticism is still valid, generally speaking.

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against https://1investing.in/ its industry peers and the overall market. The Style Scores are a complementary set of indicators to use alongside the Zacks Rank.

It allows the user to better focus on the stocks that are the best fit for his or her personal trading style. It looks like you aren’t logged in.Click the button below to log in and view your recent history. Here are two numbers that underlie investors’ recent concerns with Prospect Capital. It doesn’t take a fortune or a lot of time to beef up your retirement income.

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Historical PSEC Price Data

Style is calculated by combining value and growth scores, which are first individually calculated. The technique has proven to be very useful for finding positive surprises. In fact, when combining a Zacks Rank #3 or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time, while they also saw 28.3% annual returns on average, according to our 10 year backtest. Zacks Earnings ESP (Expected Surprise Prediction) looks to find companies that have recently seen positive earnings estimate revision activity. The idea is that more recent information is, generally speaking, more accurate and can be a better predictor of the future, which can give investors an advantage in earnings season.

Its profit margins reflect the efficient management of its investment portfolio. Today we’ll discuss a pack of discarded dividend stocks paying up to 12.6%. Not only are these yields real, and spectacular, they have price upside potential to boot. Most vanilla investors like to buy stocks that are well-liked by Wall Street analysts.

• Prospect Capital is trading at $5.98 which implies a gigantic net asset value discount of 35%.
• But costs continue to weigh hard on the restaurant—in its latest earnings report, management lowered its Q4 revenue estimates, which also brought down its full-year implied revenue estimates.
• So let’s go dividend dumpster diving and fish out these 6% to 12.6% payers together (how romantic, I know).
• Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations.

Since then, PSEC shares have decreased by 14.0% and is now trading at $6.01. There is a growing demand for financing solutions in the middle-market segment. Many companies in this space require capital for expansion, acquisitions, or refinancing, creating opportunities for investment firms like Prospect Capital to provide customized funding options. Technological advancements and digital transformation have also significantly impacted the investment industry, enhancing operational efficiency and enabling new investment strategies. Prospect Capital’s valuation metrics, such as the price-to-earnings and price-to-book ratios, are competitive within the industry. While various factors can influence valuation, the company’s strong performance and market positioning contribute to its favorable valuation compared to its peers.

A Year Later, Same Story for 2 BDCs: PSEC Up, FSC Down

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The only thing better than a true contrarian stock, of course, is a contrarian stock with a massive dividend. So, let’s sit down and explore what Wall Street can’t stand right now—a seven-pack of massive yields in the 6.3% to 12.6% range. Analysts know how they get their advantageous access, and it’s by putting a positive spin on whatever they can. Dow Jones Industrial Average, S&P 500, Nasdaq, and Morningstar Index (Market Barometer) quotes are real-time. This site is protected by reCAPTCHA and the Google
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ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities. Register for Free to get streaming quotes, interactive charts, trades, portfolio, live options flow and more. NEW YORK, Oct. 24, 2022 (GLOBE NEWSWIRE) — Prospect Capital Corporation (the “Company”) today announced the results of its previously announced cash tender offer (the “Tender Offer”) to purchase any …

Earnings

It encompasses many participants, including asset managers, private equity firms, and business development companies like Prospect Capital. High-growth stocks tend to represent the technology, healthcare, and communications sectors. They rarely distribute dividends to shareholders, opting for reinvestment in their businesses. More value-oriented stocks tend to represent financial services, utilities, and energy stocks. Trading at just 0.64x net asset value implies a huge margin of safety, and the stock is now trading near 52-week lows as well.

With a comprehensive understanding of the investment landscape, he has guided Prospect Capital to become a prominent player in the middle-market financing arena. NSA shares actually exploded post-COVID, but virtually all of those gains have evaporated right alongside activity in the housing market. You’d think a consumer staples name would look good against a potential recessionary backdrop, but that’s not the case here. No analyst currently calls BGS a Buy, while five say it’s a Hold and one says it’s a Sell. And again, Wall Street typically wears rose-colored glasses, so that’s a pretty bearish consensus Hold call. B&G Foods BGS
(BGS, 6.3% yield) might not be a first-to-mind name in the consumer staples space, but it boasts some of America’s most well-known grocery brands, including Crisco, Cream of Wheat and Green Giant.

However, a 35% discount to net asset value seems exaggerated, particularly when taking into account that the BDC’s portfolio performed overall well in the last quarter and the dividend remained covered. Prospect Capital’s non-accrual ratio rose from 0.2% (based on fair value) in the March quarter to 1.1% in the quarter ending June, reflecting an increase of 0.9 percentage points. While this is a not insignificant increase, I start to worry about credit quality only if the non-accrual ratio rises above 1.5% of portfolio assets. The company has some notable problems, including a debt-to-equity ratio of 1.2 that has persistently remained above company targets all year. Also, another couple of companies were placed on non-accrual in Q2, raising non-accruals as a percentage of amortized cost to 1.8% from 1.6% in Q1.

Company Summary

It provides debt and equity financing for buyout, growth, development, and recapitalization. Prospect Capital Corporation is a prominent investment company that provides financing solutions to middle-market companies. With a focus on private debt and equity investments, Prospect Capital aims to generate attractive risk-adjusted returns for its shareholders. Prospect Capital Corporation’s mission is to deliver consistent, high-quality returns to its investors while preserving capital.

• Prospect Capital has experienced a deterioration in credit quality and in increase in non-accruals in the last quarter which may explain why the BDC’s stock has recently fallen to 52-week lows.
• The Zacks Industry Rank assigns a rating to each of the 265 X (Expanded) Industries based on their average Zacks Rank.
• Analysts know how they get their advantageous access, and it’s by putting a positive spin on whatever they can.
• The industry with the worst average Zacks Rank (265 out of 265) would place in the bottom 1%.

With the stock trading at 52-week lows, I think the risk/reward has now turned favorable for passive income investors with a high risk tolerance. Prospect Capital announced a monthly dividend on Thursday, August 31st. Stockholders of record on Friday, October 27th will be paid a dividend of $0.06 per share on Monday, November 20th. This represents a $0.72 dividend on an annualized basis and a dividend yield of 11.98%.

MarketWatch

BDCs place loans on non-accrual when they can’t be certain that interest will be paid and the principal will be collected which typically happens when the portfolio company experiences some form of financial stress. In the last year, a minor portfolio has occurred in the sense that Prospect Capital reduced its exposure to Equity and Second Lien/Unsecured Debt and increased its percentage investments in First Liens by 6.6 percentage points. John Francis Barry has been crucial in steering the company toward success.

View analysts price targets for PSEC or view top-rated stocks among Wall Street analysts. Prospect Capital operates in the investment industry, subject to various trends, competitors, and regulatory or political issues. The investment industry is crucial in allocating capital and supporting economic growth.

The Zacks Industry Rank assigns a rating to each of the 265 X (Expanded) Industries based on their average Zacks Rank. The scores are based on the trading styles of Value, Growth, and Momentum. There’s also a VGM Score (‘V’ for Value, ‘G’ for Growth and ‘M’ for Momentum), which combines the weighted average of the individual style scores into one score.

© 2023 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided ‘as-is’ and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see Barchart’s disclaimer. As of August 31st, there was short interest totaling 13,100,000 shares, an increase of 21.5% from the August 15th total of 10,780,000 shares. Based on an average daily volume of 1,360,000 shares, the short-interest ratio is currently 9.6 days. Prospect Capital’s stock was trading at $6.99 at the beginning of 2023.

Prospect, for the record, is a big fish that has funded more than 400 investments across roughly two decades of publicly traded life. At the moment, it has $7.7 billion invested in 127 companies across 37 industries. I’ve long knocked around Prospect what are notes payable Capital (PSEC, 12.0% yield)—a monthly payer whose performance has never quite lived up to its payout potential. Business development companies (BDCs) have a reputation for super-sized yields, and two hated stocks live up to that in spades.

After all, a stock slathered with Sell labels has nothing but upgrades in its future. So let’s go dividend dumpster diving and fish out these 6% to 12.6% payers together (how romantic, I know). Our Quantitative Research team models direct competitors or comparable companies
from a bottom-up perspective to find companies describing their business in a
similar fashion. The industry with the best average Zacks Rank would be considered the top industry (1 out of 265), which would place it in the top 1% of Zacks Ranked Industries. The industry with the worst average Zacks Rank (265 out of 265) would place in the bottom 1%. An industry with a larger percentage of Zacks Rank #1’s and #2’s will have a better average Zacks Rank than one with a larger percentage of Zacks Rank #4’s and #5’s.