Published Wed, 11 Sep 2019 15:18:49 -0400 on Seeking Alpha
While we live in times of inverted yield curves, near the record highs of the major U.S. stock market indices and exceptionally low treasury rates compared to historical levels, some investors might look for other non-traditional asset classes to achieve higher returns. Stocks which are yielding +10% dividend returns look attractive at first sight, however, there are always risks associated with the safety of dividends. In this article, we would like to present our readers with a very interesting and well-established business development company or (“BDC”) named Capitala Finance Corp. (CPTA). It has been distributing its shareholders a monthly dividend payment of $0.0833 per share since October 2017. That makes up an attractive 12.88% dividend yield as of September 7, 2019, which might look tempting for high-risk investors. In terms of bullish catalysts, we find the most important one the portfolio rebalancing from equity and mezzanine investments into senior secured debt. Consequently, that might lead to slightly lower returns over the long run, however, it will significantly improve the safety of the dividend payments. Investors have an option to invest in both equities or fixed-income securities of the company, however, in this article, we decided to present our readers with a potential investment into the equity side.
(Source: Investor Presentation)
CPTA’s investment strategy is primarily focused on first-lien debt financing to the... Read more