PSEC - Prospect Capital: 3 Reasons To Buy This Mediocre 12% Yield (Rating Upgrade)

2024-01-25 22:33:49 ET

Summary

• Prospect Capital is a well-diversified BDC with solid asset quality and a low ratio of non-performing loans in its portfolio.
• The BDC has strong dividend coverage on a 5-quarter rolling basis, with a dividend coverage ratio of 152%.
• Prospect Capital trades at a massive discount to net asset value, making it an attractive buy for income investors.
• I explain three reasons why I see Prospect Capital as a buy for speculative income investors.

Prospect Capital ( PSEC ) is a controversial BDC that has its fair share of supporters and critics. The BDC has one of the longest track records in the industry as it was established more than two decades ago. The BDC has seen periodic cuts to its dividend throughout its history, but I believe the current investment setup in terms of net asset value discount, asset quality and dividend coverage actually provides some legitimate support for making a long case for Prospect Capital. The yield, however, remains risky and investors should monitor the BDC's NII performance as well as dividend coverage!...

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