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Saratoga: The Time Has Come, Execute Buy Order

Apr. 05, 2022 10:14 AM ETSaratoga Investment Corp (SAR)13 Comments
Daniel P. Varga profile picture
Daniel P. Varga


  • SAR’s debt structure is ideal for the rising interest rate environment.
  • The dividend yield climbed above 9% with strong management intentions to maintain the dividend payments in the future.
  • SAR has outperformed its earnings per share estimates 79% of the time in the last 10 years.

3D nyilak és százalékjeleket a háttérben egy épület építés alatt álló és amerikai bankjegyek. A pénzügyi és jelzálog-kamatlábak növekedésének fogalma, az építőipar nyeresége.

Lari Bat/iStock via Getty Images

Investment thesis

The last 3-to 4 months (since I published an article about SAR) have been rough in terms of price appreciation if you already held a position in Saratoga Investment Corp. (NYSE:

This article was written by

Daniel P. Varga profile picture
Started investing more than 10 years ago. Mainly focusing on Large-Caps and occasional story stock. In addition, I am a regular buyer and analyzer of REITs, mREITS, and asset managers. I also have a dividend-focused portfolio with an investment horizon of 15 to 25 years. Follow me for comparison articles such as AAL vs. LUV or USB vs. C.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in SAR over 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (13)

firstaidkit profile picture
This advise did not age well, like so many others. It was an orderly down turn, showing an apparent bottom, that turned into a liquidation run that is yet to abate. When it does there will be some very nice buying opportunities but until then I'm going to go find something else to do.
Damon Judd profile picture
@firstaidkit this comment did not age well. SAR is one of a handful of stocks that are up today after the latest CPI report. Seems to be holding up pretty well relative to just about anything else with a 9% yield.
firstaidkit profile picture
@Damon Judd I stand corrected sir. Still on my watch list and I await the next dip.
Damon Judd profile picture
@firstaidkit fair enough. Likely will dip again. Good luck!
Thanks for the article. You convinced me to sell. The dividend coverage is terrible. Are there revenues floating rate? I see you do not own any shares, so I guess you really do not really support your buy recommendation. Pretty weird.
It is not clear to me why you state that SAR is yielding at 9.01% based on the price of $27.29 and a dividend of $2.12. Looks like 7.8%. Please explain.
I don't know why you picked SAR as an exceptional opportunity. You state the dividend may be overstretched which doesn't auger well. The payout ratio is one of the highest. It is a modest sized BDC with modest growth and nothing particular to recommend it more highly than at least 30 of the 50 BDCs which are out there.
@northharrow I have been in and out since 2010. If you do a long run NAV return comparison, even risk adjusted, this is a top 10% BDC, period. They have a tremendous underwriting track record. They have doubled NAV while paying out a nice dividend. Only TSLX, MAIN, CWSC, HTGC (beneficiary of the second great tech bubble) and maybe a couple others are comparable on underwriting record. All the outperforming comps trade at hefty premiums.

I want to own it again but sold at $28 and probably won't be back in again until credit spreads blow out which I expect later this year as the Fed and markets overshoot on tightening and inflation begins to collapse.
@Robin Heiderscheit A longer run of 15 years certainly doesn't impress. But of course you may choose where to start your run.
@northharrow the first iteration of the company was called GSVC or something like that . . . anyway they ran it into the ground during the GFC . . . The current management team came over from the old Dillon Read in 2010 and that is the track record I am referring to . . . they had no involvement whatsoever prior to 2010 . . . portfoliovisualizer says the total return has been about 14% annually since they took over, which sounds about right to me
SAR's cost of debt in JAN 4.50%. That is almost 200 basis points higher than better and best of breed BDC borrowings. We are at the end of an interest rate cycle and this is the time where bigger, better, and best of breed BDCs will outperform smaller BDCs like SAR because that 200 basis point borrowing difference is the difference between lending to top notch small businesses and being forced to lend to riskier businesses because you have a 200 basis point differential that can only be covered by taking on greater risks.

It means that better quality businesses will approach better and best of breed BDCs knowing they can get a lower rate than at an SAR.
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