Earnings Preview For BDCs: Q1 2013, Part 4

by: BDC Buzz

This article covers seven BDCs reporting financial results over the next couple weeks with my latest rankings as well as expected earnings for the quarter ended March 2013. The article is a follow up to Part 1, Part 2, and Part 3.

Apollo Investment (NASDAQ:AINV) is a BDC that I covered early on in "The Good, The Bad, And The Maybe?" series. I considered it one of 'The Maybe' BDCs until it starts to grow net investment income as discussed in this article. AINV will report its fourth quarter and fiscal year results before the markets open on May 23, with projected EPS of $0.21 covering its dividend of $0.20.

NGP Capital Resources (NGPC) will report its financial results for the quarter ended March 31, on May 7 with projected EPS of $0.14 short of its $0.16 dividend. On February 22, it announced the closing of its first two non-energy middle market portfolio investments, in an effort to diversify its portfolio.

KCAP Financial (NASDAQ:KCAP) is one of the riskier BDCs with 24% of its portfolio in collateralized loan obligation securities as discussed in "American Capital: Is It Good?". KCAP will release its financial results for first quarter ended March 31, after the close of business on May 6. Analysts are projecting EPS of $0.26 short of covering its dividends as discussed in this article.

Full Circle Capital (FULL) has a history of not covering its dividends making it one of 'The Bad' BDCs as discussed in this article and is expected to report later this month with EPS of $0.20 short of its $0.23 dividend.

Gladstone Investment (NASDAQ:GAIN) is another BDC with a higher risk profile due to its high non-accruals as discussed in this article and less industry diversification (mostly industrials and basic materials). GAIN rescheduled its report of earnings for the fourth quarter and year ended March 31, from May 20, to after the stock market closes on May 14.

Medallion Financial (TAXI) is a unique BDC for many reasons which I do not follow closely but is expected to report EPS of $0.27 later this month.

Garrison Capital (NASDAQ:GARS) began trading on March 27 with its IPO of 6,133,334 shares, at a public offering price of $15.00 per share, raising approximately $92 million in gross proceeds. It currently has a market capitalization of $250 million and intends to declare a quarterly distribution of approximately $0.35 per share, or an effective annual yield of around 9%, payable at or near the end of the second calendar quarter of 2013. EPS is expected to grow from $0.22 for Q1 to $0.33 for Q2 just short of covering its projected dividend.

These are the five general criteria I use to evaluate BDCs:

  • Profitability (EPS to cover dividends, NAV and EPS growth)

  • Risk (diversification, portfolio quality, volatility, leverage)

  • Payout (sustainable, consistent, growing)

  • Analyst Opinions

  • Valuation (NAV, P/E, PEG)

For more information about BDCs and how I evaluate them, please see this article.

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.