Dividend growth investors normally aren't interested in accumulating shares in Business Development Companies (BDC) like Triangle Capital Corporation. But investors interested in a healthy current stream of income, however, are often very interested. I personally believe that even dividend growth investors can benefit from owning a few shares of a BDC.
Companies like Triangle can help any investor increase his current income and assist that investor in the early stages of accumulating positions in dividend growth companies. The downside to owning shares in companies like this is that the stagnant dividend is subject to the deteriorating effects of inflation. Without increasing dividends, purchasing power will decrease over time. Smart investors will greatly appreciate these dividends and diversify their portfolios.
The Company
| Triangle Capital Corporation (TCAP) is a BDC (Business Development Company) specializing in private equity and mezzanine investments. It focuses on leveraged buyouts, management buyouts, ESOPs, change of control transactions, acquisition financings, growth financing, and recapitalizations in lower middle market, mature, and later stage companies. The firm prefers to make investments in many business sectors including energy, manufacturing, distribution, transportation, communications, restaurants, media, health services, and others. It primarily invests in companies located in the United States, with emphasis on the Southeast and Mid-Atlantic. The firm makes equity investments between $1 million and $25 million and debt investments between $5 million and $30 million per transaction, in companies having annual revenues between $20 million and $200 million and EBITDA between $3 million and $35 million and can also co-invest. It primarily invests in senior subordinated debt securities secured by second lien security interests in portfolio company assets, coupled with equity interests. The firm also invests in senior debt securities secured by first lien security interests in portfolio companies. Triangle Capital Corporation was founded in 2002 and is based in Raleigh, North Carolina. (Daily Chart) (Weekly Chart) | 16 September 2014 Price $26.50 1yr Target $29.63 Analysts 4 1yr Cap Gain 11.81% Dividend $2.16 Yield 8.15% 1yr Tot Return 19.96% Market Cap $740.41 Mil Payout Ratio 77.10% Beta 0.61 EPS (ttm) $2.80 EPS next yr $2.40 P/E 9.46 PEG 1.89 Forward P/E 11.04 Debt/Equity 0.84 ROA 9.60% ROE 17.50% |
The Fundamentals
Revenues have been on a pretty steady incline for the last few years as can be seen in the data below. The one exception during this period was 2009 when the US was experiencing a rather severe recession and companies weren't borrowing to expand their businesses. Earnings, however, have been erratic at best. Up years were followed by down years which were followed by up years, etc.
Dividends have been the most consistent but they have been consistent at a cost (see below). The cost has been allowing the payout ratio to vary from 54.19% to 344.68% over this period. Without more stability in future earnings, the payout will continue to vary for the next couple of years. Eventually things will start to settle down and it's reasonable to expect that future dividends will begin to increase at a rate more in line with the expected rate of increase in revenues and/or earnings (near 10%).
There are many things that can influence future revenues and earnings like inflation, management's ability to raise funds through borrowing and secondary stock offerings, management's ability to make loans, and the ability of their customers to stay out of bankruptcy. As a result, companies like Triangle Capital Corporation have to be monitored regularly, but the dividend income these companies produce is excellent.
Dividends have been the most consistent but they have been consistent at a cost (see below). The cost has been allowing the payout ratio to vary from 54.19% to 344.68% over this period. Without more stability in future earnings, the payout will continue to vary for the next couple of years. Eventually things will start to settle down and it's reasonable to expect that future dividends will begin to increase at a rate more in line with the expected rate of increase in revenues and/or earnings (near 10%).
There are many things that can influence future revenues and earnings like inflation, management's ability to raise funds through borrowing and secondary stock offerings, management's ability to make loans, and the ability of their customers to stay out of bankruptcy. As a result, companies like Triangle Capital Corporation have to be monitored regularly, but the dividend income these companies produce is excellent.
| Year 2015 Est 2014 Est 2013 2012 2011 2010 2009 2008 2007 | Revenues $121.74 Mil $102.98 Mil $80.79 Mil $73.95 Mil $52.46 Mil $28.20 Mil $20.86 Mil $21.35 Mil $12.73 Mil | Earnings $2.40 $2.18 $2.94 $2.25 $2.90 $1.99 $0.47 $1.11 $1.31 | Dividends $ $ $2.16 $2.02 $1.77 $1.65 $1.62 $1.13 $0.71 | Payout Ratio % % 73.46% 89.77% 61.03% 82.91% 344.68% 101.80% 54.19% |
| Revenue Growth Rate 1 year = 9.24% 2 year = 24.09% 3 year = 41.52% 4 year = 40.28% 5 year = 30.49% | Earnings Growth Rate 1 year = 30.66% 2 year = 0.68% 3 year = 13.74% 4 year = 58.14% 5 year = 21.50% | Dividend Growth Rate 1 year = 6.93% 2 year = 10.46% 3 year = 9.29% 4 year = 7.45% 5 year = 13.83% |
The Technicals
The technicals aren't providing any information on the future direction for this stock. With the RSI and MACD both near the centerline on both the daily and weekly chart, the charts are telling me that this company is moving sideways, at least for the near future. The ADX shows that there's no pressure by the buyers or sellers trying to push the stock either up or down. Once again this indicator is telling me that this company is moving sideways.
 Daily Chart |  Weekly Chart |
Conclusion
I like BDCs and there are a number of them available to invest in. I have an entire section devoted to listing 35 BDCs that are worth investigating located here. While I consider this company to be a good investment for an investor like me looking for current income with minimal growth, my favorite BDC is Prospect Capital Corporation (PSEC). I intend to build a small position in Triangle Capital Corporation in the near future to augment my current dividend income. If the company is able to stabilize and increase its dividend annually at a rate near 10%, I'll likely add to that position in the future.
The Live Interactive Chart
Additional Articles of Interest
"Prospect Capital Corporation Redux" dated 17 December 2013
"Prospect Capital Corp" dated 2 September 2013
"Prospect Capital Corporation Redux" dated 17 December 2013
"Prospect Capital Corp" dated 2 September 2013
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