ARCC - Prospect Capital: Dividend Safety And Valuation Attractive But Weaker Fundamentals Concerning

2024-05-25 08:00:00 ET

Summary

• Prospect Capital's share price has declined double-digits over the past year due to weaker fundamentals and portfolio quality.
• The company's declining financials and NAV erosion are concerning, but it still offers a monthly dividend with a comfortable coverage ratio.
• The stock is undervalued with a P/NAV ratio of 0.63x, but risks include exposure to the high interest rate environment and real estate market.
• PSEC's dividend safety, valuation, and low leverage make the stock attractive for income-focused investors.
• If the company's NAV continues to decline, this will likely impact the share price negatively going forward.

Introduction

Prospect Capital ( PSEC ) is a popular BDC amongst dividend investors and retirees as a result of its steady, monthly dividend. But while many of its peers have enjoyed strong price appreciation over the past year, the BDC has seen its share price decline double-digits over the same period, a result of its portfolio quality and weaker fundamentals....

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