Capital Southwest (CSWC) Stock

With the youngest baby boomers (Americans born between 1946 and 1964) approaching retirement age, it is becoming increasingly important to focus on magnificent dividend stocks that will supply significant passive income either in or out of designated retirement accounts like IRAs.

Capital Southwest's stock correction, triggered by higher non-accruals and lower net investment income, presents a buying opportunity at $21.50 for passive income investors. Despite the increased non-accrual ratio, Capital Southwest's First Lien portfolio grew to $1.4 billion, with cash interest collection up 2% QoQ. The base dividend was raised to $0.58 per share, but the rising dividend pay-out ratio to 100% raises concerns about future supplemental dividends.

MAIN and CSWC are leading blue-chip BDCs with sky-high dividend yields. However, their performances have sharply diverged from each other in recent months. I discuss which is the better buy right now.

DALLAS, Dec. 10, 2024 (GLOBE NEWSWIRE) -- Capital Southwest Corporation (“Capital Southwest” or the “Company”; Nasdaq: CSWC), an internally managed business development company focused on providing flexible financing solutions to support the acquisition and growth of middle market businesses, today announced that the U.S. Small Business Administration (the “SBA”) has issued a “green light” letter inviting Capital Southwest to submit its application to obtain a license to operate a second Small Business Investment Company (“SBIC”) subsidiary.

Capital Southwest is an internally managed BDC with a diversified portfolio, primarily focused on first-lien debt, offering a 10% regular dividend yield. Despite recent stock price volatility and increased non-accruals, CSWC's long-term value creation has provided my portfolio with attractive returns. Lower interest rates could improve the Company's equity investments and credit situation, but dynamic rate cuts may pressure dividend coverage, potentially reducing yield-on-cost.

Panic selling is a terrible way to destroy your income stream, and retirees are often guilty of this practice. We review the recent earnings and dip to see if the sell-off is overdone. I collect income from all corners of the economy to fund my retirement.

Capital Southwest's recent earnings report showed a decline in net investment income and total investment income, but impressive portfolio growth and solid credit quality. Despite a slight drop in NAV, this grew on an absolute basis. Their balance sheet remains strong with significant liquidity and one of the  lowest leverages amongst their peers. Investors should wait for a pullback to around $18 or below for a better entry point, as the stock is currently expensive.

DALLAS, Nov. 05, 2024 (GLOBE NEWSWIRE) -- Capital Southwest Corporation (Nasdaq: CSWC) (“Capital Southwest”) today announced the pricing of $200,000,000 principal amount of 5.125% Convertible Notes due 2029 (the “notes”) in an underwritten offering (the “offering”). Capital Southwest also granted the underwriters of the notes an option to purchase up to an additional $30,000,000 principal amount of notes, solely to cover over-allotments. The sale of the notes is expected to close on November 8, 2024, subject to customary closing conditions.

DALLAS, Nov. 04, 2024 (GLOBE NEWSWIRE) -- Capital Southwest Corporation (Nasdaq: CSWC) (“Capital Southwest”) today announced the commencement of a registered public offering of unsecured convertible notes due 2029 (the “notes”) in an underwritten offering (the “offering”).