PSEC - Hercules Capital: Trades At A Premium For A Reason (Rating Upgrade)

2024-03-30 00:28:32 ET

Summary

• Hercules Capital's portfolio is diverse in industry and region. This mitigates any concentration risk.
• Loan commitments have consistently increased since inception. There has never been a year where commitments have decreased.
• Despite the premium to NAV, HTGC is well-suited to thrive regardless of interest rate cuts.
• The price currently trades at a higher premium to NAV over 60% but the growing NII justifies this premium.

Overview

I previously covered Hercules Capital ( HTGC ) back in August of 2023. Since then, HTGC has delivered a total return of over 13% due to the consistent NII (net investment income) growth and high dividend distributions. The price has run up over the last 6 months and now the dividend yield sits around 8.7%. Although the price has run up, I am upgrading my rating to a Buy at these levels. The price trades at a large premium to NAV (net asset value) at the moment but I plan to continue increasing my position to snowball my dividend income....

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