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Fifth Street Senior Floating Rate Corp. Has Falling TII, NII, NAV + Dividend

|Includes: Oaktree Strategic Income Corporation (OCSI)

Fifth Street Senior Floating Rate Corp. cuts its dividend for the second time in eight quarters. No other lower PWAY (portfolio weighted average yield) BDC (GBDC, PFLT or SUNS) has ever cuts its dividend. For a sub-sector of BDCs where it is relatively hard to mess up - Fifth Street finds a way.

The projections from Yahoo Finance:

  Current Qtr. Next Qtr. Current Year Next Year
No. of Analysts 3 3 3 2
Avg. Estimate 0.22 0.22 0.89 0.91
Low Estimate 0.22 0.22 0.88 0.91
High Estimate 0.23 0.23 0.9 0.91
Year Ago EPS 0.24 0.2 0.86 0.89
Revenue Estimate Current Qtr. Next Qtr. Current Year Next Year
No. of Analysts 3 3 3 2
Avg. Estimate 12.55M 12.67M 49.58M 54.07M
Low Estimate 10.76M 10.76M 43.04M 53.6M
High Estimate 13.68M 13.94M 53.1M 54.55M
Year Ago Sales 13.91M 13.2M 53.43M 49.58M
Sales Growth (year/est) -9.80% -4.00% -7.20% 9.10%

I have quoted this finding before - "There is more optimism in a falling earnings projection than there is in a rising earnings projection". The Q4-16 TII projection of $12.550 million was a 9.8% fall from the prior year. Actual TII was $11.561 million. The NII projection was for a fall to $0.22 from $0.24. Actual NII was $0.1997/share.

The prior dividend rate was at $0.225/quarter. The upcoming dividend is at $0.19/quarter.

My spreadsheets:

  Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13
Realized & Unrealized Gains -5.159 2.236 -5.247 -6.446 -20.308 -7,114.935 -4,198.072 -158.452 -4.948.796 274.131 -69.719 -86.752 -271.814
Realized & Unrealized Gains/share -0.1751 0.0759 -0.1781 -0.2187 -0.6892 -0.2415 -0.1425 -0.0538 -0.1679 0.0295 -0.01462 -0.0130 -0.0408
  Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13
Interest income 10.908 12.232 11.600 11.555 12.146 11.702 10.624 9.627 7.887 3.3 2.979 2.568 1.305
Fee income 0.406 0.209 0.815 0.741 1.313 1.710 3.008 2.265 7.973 3.0 0.866 0.837 1.001
Total investment income 11.561 13.203 13.114 13.195 13.914 14.068 13.707 11.892 15.860 6.285 3.845 3.406 2.306
Net investment income 5.884 6.342 6.164 5.785 7.002 7.402 6.339 6.701 10.425 3.805 1.853 1.791 1.503
Investments @ fair value 0.540 0.574 0.598 0.575 0.604 0.624 0.628 0.584 0.596 0.300 0.192 0.180 0.135
Wt Av Share Count 29.467 29.467 29.467 29.467 29.467 29.467 29.467 29.467 29.467 17.075 6.667 6.667 6.667
TII/share my calculation $0.3923 $0.4481 $0.4450 $0.4478 $0.4722 $0.4774 $0.4652 $0.3267 $0.5382 $0.3681 $0.5767 $0.5109 $0.3459
NII/share my calculation $0.1997 $0.2152 $0.2092 $0.1963 $0.2376 $0.2512 $0.2151 $0.2274 $0.3538 $0.2228 $0.2779 $0.2686 $0.2254
NII/share FSFR calc. $0.20 $0.22 $0.21 $0.20 $0.24 $0.25 $0.22 $0.23 $0.35 $0.22 $0.28 $0.27 $0.23
Distributions/share $0.1900 $0.225 $0.225 $0.225 $0.225 $0.225 $.30 $0.30 $0.30 $0.30 $0.27 $0.23 $0.21
NAV/share $10.86 $11.06 $10.99 $11.18 $11.36 $12.11 $12.23 $12.46 $12.53 $12.65 $15.13 $15.13 $15.10
Wt Av Yield 8.9% 8.6% 8.6% 8.4% 8.0% 8.1% 7.6% 7.4% 7.1% 7.2% 7.0% 6.7% 6.6%
NII/TII ratio 50.9% 48.0% 47.0% 43.8% 50.3% 52.6% 46.2% 56.3% 65.7% 60.5% 48.2% 52.6% 65.2%
  Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14
Debt 249.815 292.412 295.827 292.947 291.558 323.026 307.366 280.098 184.848
Debt/share 8.4778 9.9234 10.0393 9.9415 9.8944 10.9623 10.4309 9.5055 6.2731
Debt/share to NAV 78.06% 89.72% 91.35% 88.92% 87.10% 90.52% 85.29% 76.29% 50.06%
Interest expense 2.456 2.456 2.437 2.338 2.273 2.197 4.163 1.705 0.886
Interest expense/share 0.0833 0.0833 0.0827 0.0793 0.0771 0.0746 0.1413 0.0579 0.0301
Interest expense/TII 21.24% 18.60% 18.58% 17.72% 16.34% 15.62% 30.37% 14.34% 5.59%
Annualized Int exp/Debt 3.93% 3.36% 3.30% 3.19% 3.12% 2.72% N/A 2.43% 1.92%
PWAY - Int exp/Debt 497 bps 524 bps 530 bps 521 bps 488 bps 538 bps N/A 497 bps 518 bps
Q2-15 contained a one-time charge of $2.1 million related to a debt securitization that closed during the quarter.

When I wrote "For BDCs, 'No Risk, No Reward' Looks To Be 'Not True' " in May of 2016, FSFR was not included with the low PWAY BDCs due to prior management misbehavior. I do not like Fifth Street. The numbers in the spreadsheets I produce should lead you to the same conclusion.

Disclosure: I am/we are long PFLT.