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Dividend Increases For The High-Yield BDC Sector, Part 6: Gladstone Investment

Published Wed, 03 Apr 2019 10:48:23 -0400 on Seeking Alpha

BDC Dividend Changes For 2019 and Previous-Article Follow-Ups:
As mentioned in recent articles, there are a handful of Business Development Companies ("BDCs") that will likely cut dividends in 2019, including THL Credit (TCRD) as predicted in "Dividend Cuts For The High-Yield BDC Sector" and Medley Capital (MCC), which announced that it was reducing its quarterly dividend by 50% (also predicted in previous articles). However, there are also many more that will likely increase their current regular dividend and/or pay special dividends this year.
This article discusses dividend coverage for Gladstone Investment (GAIN) and the following are the three methods that I use for assessing and ranking dividend coverage:
Historical dividend coverage: Using adjusted earnings (exclude certain one-time expenses) taking into account recurring vs. one-time revenues, cash vs. PIK interest income, etc. Projected dividend coverage: Using best-, base-, and worst-case scenarios taking into account potential credit issues, portfolio growth/decline, changes to portfolio yield, various amounts of non-recurring income from dividends and fees, changes to borrowing and operational expenses. Optimal Leverage Analysis: Assessing future dividend coverage based on portfolio growth using available cash and borrowings (leverage) as well as changes in portfolio yield, apples-to-apples comparison of BDC dividend coverage using similar amounts of leverage. It is important to understand that the methodology... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
THL CREDIT 6.96   0.0 -0.86 0.84 12.09
PROSPECT CAPITAL 6.71   16.8 0.40 0.72 10.76
TCP CAPITAL 13.75   29.3 0.47 1.44 10.48
OAKTREE SPECIALTY LENDING 4.90   0.0 -1.39 0.50 10.02
GLADSTONE CAPITAL 9.50   63.3 0.15 0.84 8.84
ARES CAPITAL 19.19   10.5 1.82 1.60 8.39
MEDLEY CAPITAL 2.61   0.0 -1.62 0.15 5.81
MAIN STREET CAPITAL 43.18   16.8 2.57 2.46 5.69


Older articles featuring Thl Credit (TCRD):
Digging Into The Credit Profile For 10.7% Yielding BlackRock TCP Capital
TLT Shorts Should Be Long This 10%+ Yielding Sector
Still Waiting For A Dividend Increase From Oaktree
9.4% Yield Driven By 14 Consecutive Dividend Hikes And Still Growing: Capital Southwest
Assessing Risk: Retirement Portfolio Using BDCs Yielding 10%+
Building A Retirement Portfolio With BDCs Currently Yielding 10.6%
10% Yielding New Mountain Finance Receives Fitch Rating
Dividends By The Numbers For March 2019 And 2019-Q1
Apollo Investment: 12% Yield Supported By Improving Portfolio Quality
69 10%+ Dividend Yield WallStars Portend Ides Of March Fortunes