Profile
Sector:
Financial ServicesIndustry:
Asset ManagementCountry:
United StatesIPO:
17 March 1980Website:
http://www.capitalsouthwest.comNext earnings report:
07 August 2024Last dividends:
14 June 2024Next dividends:
N/APrice
after hours | 89 min agoAnalysts recommendations
Institutional Ownership
Included in screeners
CSWC Latest News
Capital Southwest is a financial company lending to medium-sized businesses, with a 40% stock price increase in the last year. The company manages a high-risk, high-reward portfolio of loans and equity investments, with a focus on diverse industries and strong cash flows. While the company is undervalued when considering dividends, the interest rate risk poses a potential impact on financial results and dividend distribution.
High-yield dividend stocks are some of the best investments you can make in the current environment. Most top growth and tech stocks are all trading at nosebleed valuations.
Payback period is an important measure of investment performance that is often overlooked, and in this article, I present 2 strong high-yielding picks. Capital Southwest and Brookfield Infrastructure Partners L.P. are two such stocks, with strong portfolio growth and operating performance. Capital Southwest has a diversified portfolio and efficient cost structure, while Brookfield Infrastructure Partners invests in mission-critical infrastructure assets. Both offer yields ranging from 5-9%.
There is increasing optimism about Capital Southwest's earnings potential, leading to its upgrade to a Zacks Rank #2 (Buy), which could drive the stock higher.
Thank you for participating in today's Capital Southwest Q4 2024 Earnings Conference Call.
Capital Southwest: Hefty 9% Yield Supported By Low Operating Costs
Capital Southwest has grown their dividend by a CAGR of 21.26% over the last decade. Their investment portfolio is highly rated and mostly comprised of floating rate loans. The current dividend yield for CSWC is 9.5%, and the company has declared a supplemental dividend due to high levels of income. However, future interest rate increases may stop supplementals.
Capital Southwest is a mid-sized business development company, or BDC, with a rather conventional investment strategy trading at a premium above the underlying NAV base. Despite the premium, Capital Southwest carries several aspects, which clearly distinguish it from the peers, fully justifying the premium. In this article, I elaborate on these aspects and provide my thinking on why Capital Southwest is a buy for me.
We take a look at the action in business development companies through the third week of February and highlight some of the key themes we are watching. BDCs experienced a strong 2% total return this week, recovering from previous weakness. Investors should consider sustainable sources of performance apart from traditional investment income that can create a competitive advantage for BDCs.
Capital Southwest is entering into a sustained circle of virtue. With rates remaining stubbornly higher, management is taking precautions for the future. Owning standard-bearer investments can help de-risk your portfolio.
What type of business is Capital Southwest?
Capital Southwest Corporation is a business development company specializing in credit and private equity and venture capital investments in middle market companies, mezzanine, later stage, mature, late venture, emerging growth, buyouts, recapitalizations and growth capital investments. It does not invest in startups, publicly traded companies, real estate developments, project finance opportunities, oil and gas exploration businesses, troubled companies, turnarounds, and companies in which significant senior management is departing. In lower middle market, the firm typically invests in growth financing, bolt-on acquisitions, new platform acquisitions, refinancing, dividend recapitalizations, sponsor-led buyouts, and management buyouts situations. The investment structures are Unitranche debt, subordinated debt, senior debt, first and second lien debt, and preferred and common equity. The firm makes equity co-investments alongside debt investments, up to 20% of total check and only makes non-control investments. It prefers to invest in Industrial manufacturing and services, value-added distribution, healthcare products and services, business services, specialty chemicals, food and beverage, tech-enabled services and SaaS models. The firm seeks to invest in energy services and products, industrial technologies, and specialty chemicals and products. Within energy services and products, the firm seeks to invest in each segment of the industry, including upstream, midstream and downstream, excluding exploration and production with a focus on differentiated products and services, equipment and tool rental, consumable products, and drilling and completion chemicals. Within industrial technologies, it seeks to invest in automation and process controls, handling and packaging equipment, industrial filtration and fluid handling, measurement, monitoring and testing, professional tools, and sensors and instrumentation. Within and specialty chemicals and products, the firm seeks to invest in businesses that develop and manufacture highly differentiated chemicals and products including adhesives, coatings and sealants, catalysts and absorbents, cosmeceuticals, fine chemicals, flavors and fragrances, performance lubricants, polymers, plastics and composites, chemical dispensing and filtration equipment, professional and industrial trade consumables and tools, engineered solutions for HVAC, plumbing, and electrical installations, specified high performance materials for fire protection and oilfield applications. It may also invest in exceptional opportunities in building products. The firm seeks to invest in the United States. The firm seeks to make investments ranging from $5 to $25 million in securities. It seeks to make equity investments ranging from $5 million to $50 million and debt investments between $5 million and $20 million and co-invest in transaction size up to $40 million. It prefers to invest in companies with revenues approaching above $10 million, profitable operations, historical growth rate of at least 15 percent per year. Within the lower middle market, it seeks to invest in with less than $15 million in EBITDA and also opportunistically invests in the upper middle market, generally defined as companies with EBITDA in excess of $50 million. In addition to making direct investments, the firm allocates capital to syndicated first and second lien term loans in the upper middle market. Criteria for Upper Middle Market Syndicated 1st Lien is EBITDA Size more than $30 million, Closing Leverage greater than 4 times, investment hold size between $5 million and $7 million, investment yield greater than 6.5%. Criteria for Upper Middle Market Syndicated 2nd Lien is EBITDA Size more than $50 million, Closing Leverage greater than 6 times, investment hold size between $5 million and $7 million, investment yield greater than 9%. It prefers to take a majority and minority stake. The firm has the flexibility to hold investments for very long period in its portfolio companies. It may also invest through warrants. The firm prefers to take Board participation in its portfolio companies. Capital Southwest Corporation was founded on April 19, 1961 and is based in Dallas, Texas.
What sector is Capital Southwest in?
Capital Southwest is in the Financial Services sector
What industry is Capital Southwest in?
Capital Southwest is in the Asset Management industry
What country is Capital Southwest from?
Capital Southwest is headquartered in United States
When did Capital Southwest go public?
Capital Southwest initial public offering (IPO) was on 17 March 1980
What is Capital Southwest website?
https://www.capitalsouthwest.com
Is Capital Southwest in the S&P 500?
No, Capital Southwest is not included in the S&P 500 index
Is Capital Southwest in the NASDAQ 100?
No, Capital Southwest is not included in the NASDAQ 100 index
Is Capital Southwest in the Dow Jones?
No, Capital Southwest is not included in the Dow Jones index
When does Capital Southwest report earnings?
The next expected earnings date for Capital Southwest is 07 August 2024