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Monroe Capital Offers 15% Yield Due To Portfolio Credit Issues

Published Wed, 26 Dec 2018 18:31:23 -0500 on Seeking Alpha

I have recently been purchasing shares of higher-quality Business Development Companies ("BDCs") with risk-averse balance sheets prepared for rising interest rates and/or a potential economic downturn. However, I have not purchased shares of Monroe Capital (MRCC) since 2016 for the reasons discussed in this article.
High-yield investments, including BDCs, have been declining since early September potentially for a few reasons including investors expecting higher yields and fear of an economic slowdown and/or higher interest rates. However, MRCC has declined more than the others and is now below its January/February 2016 lows (discussed next):

Source: Yahoo Finance
Quick BDC Market Update
The general markets have been declining for various reasons, some of which are related to BDCs (including a potential economic slowdown) but the underlying fundamentals of the U.S. economy and BDCs remain strong. In January/February 2016, the markets experienced similar concerns including slowing Chinese growth and increased energy sector defaults driving higher yield expectations especially for non-investment grade debt as shown in the chart below. Please see “Junk bonds suffer a rare negative return in January”. This also resulted in wider interest rate spreads and favorable lending conditions. Higher quality BDCs typically have much higher portfolio growth during these periods as they take advantage of higher market yields.

Source: FRED
... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
CAPITALA FINANCE 7.64   0.0 -0.51 1.00 13.33
GARRISON CAPITAL 7.07   11.2 0.63 0.92 13.26
APOLLO INVESTMENT 14.22   14.8 0.96 1.80 12.63
BLACKROCK KELSO CAPITAL 6.16   17.6 0.35 0.72 11.92
PROSPECT CAPITAL 6.68   6.6 1.02 0.72 10.68
ARES CAPITAL 16.34   7.4 2.20 1.56 9.58
GLADSTONE INVESTMENT 10.54   3.4 3.12 0.82 7.88
GOLUB CAPITAL BDC 17.60   12.8 1.37 1.28 7.41
MAIN STREET CAPITAL 36.03   9.7 3.70 2.34 6.71

CAPITALA FINANCE - CPTA
CAPITALA FINANCE - CPTA  


Older articles featuring Capitala Finance (CPTA):
Your Monthly-Paid Dividends From 82 All-Cap U.S. Equities And 80 Funds For January
11 'Safer' Dividends From 101 10%+ Yield WallStars Glow At End-O-December
Dogcatcher's Monthly Pay Dividend December Run-Down
Monthly Paid Dividends From 87 All Cap U.S. Equities And 80 Funds For November
Why I Sold This 11.1% Yielding BDC That Could Now Be A 'Buy'
This Stable 10.1% Yielding BDC Is A Strong Buy At These Levels
Your Monthly Paid Dividends From 87 All Cap U.S. Equities And 80 Funds For October
Mispriced Baby Bond, Bargain With A 7.6% Yield To Maturity
Approaching Oversold Conditions, Driving 9% Yield With Upcoming Specials
14.5% Yielding ETN: Time To Buy Or Take Profits?

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