Prospect Capital Corporation (PSEC) is a leading provider of flexible private debt and equity capital to sponsor-owned and non-sponsor-owned middle market companies in the United States and Canada. PSEC is a publicly-traded closed-end investment company that has elected to be regulated as a business development company (BDC) under the Investment Company Act of 1940. PSEC is managed by Prospect Capital Management LLC.
 |
Prospect Capital Corporation is one of those companies that I’ve liked from the first day I ran my eyes across it’s dividend history (see below to download a pdf file containing the dividend history of Prospect Capital Corporation). I can’t remember when I first came across this equity but it’s been quite a few years ago. This is a stock that pays a dividend every month just like clockwork. It goes X-dividend at the end of each month and pays a dividend around the 20th of the next month. It never misses a beat. Its solid and consistent dividends are very appealing to me and this monthly consistency caught my attention immediately.
The next thing I discovered (and immediately got excited about) was the fact that Prospect Capital increases its dividend each and every month. This is something that is so rare that I cannot find any other company that does this so consistently. Now I’ll grant you that the increases are minuscule but the fact that they increase every single month informs me that management is proactive in its responsibility toward sharing their profits with their shareholders.
The next thing I discovered (and immediately got excited about) was the fact that Prospect Capital increases its dividend each and every month. This is something that is so rare that I cannot find any other company that does this so consistently. Now I’ll grant you that the increases are minuscule but the fact that they increase every single month informs me that management is proactive in its responsibility toward sharing their profits with their shareholders.
"I don't like stock buybacks. I think if a company has the money to buy their stock back, then they should take that and increase the dividends. Send it back to the stockholder. Let them invest their money again from the dividends." |
Located at the bottom of this article is a pdf file that can be downloaded of the recent dividend history and, as you can clearly see, Prospect Capital pays approximately $.11 per month in dividends. As you can also see from the chart, Prospect Capital seems to vacillate from just below to just above $11.00 per share (52 week low of $10.05 and a 52 week high of $11.62). If an investor can obtain this stock for $11 per share (which can easily be done with just a little patience) then the dividend yield results in 1% per month, which is phenomenal. It has both the advantage of providing a high yielding income combined with a monthly distribution which increases my ability to compound the dividends in a timely manner.
I have owned this company for quite a few years now and I haven’t been disappointed. PSEC has a projected one year price target of $11.72 but my experience is that it will stay near $11 per share as it similarly has done for a number of years. This company has a market capitalization of $3.1B which makes this no small company by any means and it has an average daily share volume of over 3M shares so the stock is very liquid (both of these are pluses). Analyst's earnings estimates for the current year ending June 2014 are $1.26 and for the year ending Jun 2015 are $2.14, which is consistent with a stock price that doesn’t waiver much.
PSEC is also listed on the options exchange so a strategy of shorting puts with a strike price of $11 will work nicely in order to get into the stock at that price and lock in that 12% yield. In addition, once the stock is owned an investor can sell call options and increase the yield to a level in excess of 12% with relative safety. This way if the stock is taken away it can be bought back once again using puts.
I really haven’t found a reason not to own this stock. Prudence is the only thing that keeps me from throwing my entire wealth into this stock. For an earlier review of this company please see my article entitled “Prospect Capital Corp” dated 09/02/2013.
I have owned this company for quite a few years now and I haven’t been disappointed. PSEC has a projected one year price target of $11.72 but my experience is that it will stay near $11 per share as it similarly has done for a number of years. This company has a market capitalization of $3.1B which makes this no small company by any means and it has an average daily share volume of over 3M shares so the stock is very liquid (both of these are pluses). Analyst's earnings estimates for the current year ending June 2014 are $1.26 and for the year ending Jun 2015 are $2.14, which is consistent with a stock price that doesn’t waiver much.
PSEC is also listed on the options exchange so a strategy of shorting puts with a strike price of $11 will work nicely in order to get into the stock at that price and lock in that 12% yield. In addition, once the stock is owned an investor can sell call options and increase the yield to a level in excess of 12% with relative safety. This way if the stock is taken away it can be bought back once again using puts.
I really haven’t found a reason not to own this stock. Prudence is the only thing that keeps me from throwing my entire wealth into this stock. For an earlier review of this company please see my article entitled “Prospect Capital Corp” dated 09/02/2013.
Prospect Capital Corporation, 17 December 2013
| Prospect Capital Corporation Dividend History 
| ||||
Print 
PDF
RSS Feed
