PNNT - PennantPark Investment: Higher Yielding Monthly Distribution But Lower Total Return

2024-04-02 09:25:35 ET

Summary

• PNNT provides investors with a high dividend yield of 12% and monthly distributions. However, I believe that income is likely to be affected by future rate cuts.
• The debt investment portfolio mostly consists of first lien senior secured loans. They operate within the middle market of companies earning between $10M - $50M.
• The price currently trades at a slight discount to NAV of 10%.  However, the average discount to NAV over the last 3 year period is closer to -26%.

Overview

PennantPark Investment Corporation ( PNNT ) is another BDC (business development company) that offers investors exposure to debt investments while providing a dividend yield over 12%. The company has debt investments in middle market companies that they earn revenue from through interest on payments received. The high yield makes PNNT attractive but the inclusion of the monthly distributions of the dividend is a nice bonus. We can see that the high distributions have made up almost all of the return here since the price has remained mostly the same over the last five year period....

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