PennantPark Investment Corporation (NASDAQ:PNNT) shares have been in a solid uptrend, rising from about $10 in June to a recent high of $11.41. However, the stock has dropped in recent days after the company announced a secondary stock offering. PennantPark has agreed to sell 9 million shares at $10.82 per share and it will use the proceeds to reduce debt, fund new investments, and for general corporate or strategic purposes. Secondary offerings often cause a stock to drop in value, but in recent months the decline has often been just temporary in nature, especially when the stock pays a strong dividend yield.
PennantPark shares offer a dividend yield of over 10%, and that is why the stock is likely to rebound from the recent drop from $11.46 to just $10.55 per share. Investors who buy this dip could be setting themselves up for solid income, dividend growth and perhaps even a little capital gains if the stock rebounds. The dividend payout has doubled in just about five years, from about 14 cents quarterly per share in 2007, to 28 cents per quarter today.
PennantPark invests in well-managed companies like Magnum Hunter Resources Corporation (NYSE:MHR), Prepaid Legal Services, Inc., Jacuzzi Brands, Corp., Penton Media, and others. This diversification across industries helps to lower risks for the company and shareholders. For the quarter ended June 30, the company reported net investment income of $15.6 million, or 28 cents per share. It also stated that the average yield on debt investments was 13.3%. With the stock now right around the 50-day moving average of $10.58 per share, this dip looks like a solid opportunity to buy this high-yielder at a reasonable price.
Here are some key points for PNNT:
- Current share price: $10.55
- The 52 week range is $8.01 to $11.46
- Earnings estimates for 2012: $1.09 per share
- Earnings estimates for 2013: $1.18 per share
- Annual dividend: $1.12 per share, which yields over 10%
Data is sourced from Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Disclaimer: No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.