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."
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.