Fidus InvestmentNASDAQ: FDUS

On a YTD basis, Fidus Investment has delivered positive total returns, but slightly underperformed the BDC index. This is mostly related to the FDUS ETF's defensive characteristics, which decrease the beta profile, thus making it less sensitive to systematic price surges in the BDC space. Looking at the Q1 2024 earnings dynamics, we will notice mixed dynamics.

Fidus Investment Corporation has a reputation for distributing large special dividends to shareholders. The company's core dividend pay-out ratio in Q1 was below 100% and its net asset value remained stable. Fidus Investment's equity portfolio is performing well, making it a compelling value proposition for passive income investors.

SLR Investment anticipates ongoing growth in net interest income based on Q1 earnings.

Fidus Investment, a successful Business Development Company (BDC), has shown impressive performance with high income and price growth. Compared to its industry counterparts, FDUS has delivered strong total returns, potentially because of its sensitivity to interest rates. Concerns arise that FDUS may decline if interest rates decrease. The company primarily targets lower middle market businesses and maintains a diversified portfolio, primarily consisting of investments in first lien senior secured debt.

Welcome to the Fidus Investment Corporation's Q1 2024 Earnings Conference Call on May 3, 2024 at 9:00 AM ET. Participants include Jody Burfening, Ed Ross, and Shelby Sherard.

Fidus Investment Corporation has a growing investment portfolio and a moderate pay-out ratio based on adjusted net investment income. The BDC comfortably covered its dividend with adjusted NII in the fourth quarter and pays special dividends to distribute excess portfolio income. The stock is selling at a 2% discount to net asset value and offers a well-covered 9% yield.

Fidus Investment has underperformed the benchmark by 230 basis points since the publication of my relatively conservative article back in December last year. Yet, now after assessing the Q4 results and factoring in the improvements within the key fundamental metrics, I have decided to assign buy for FDUS. In this article, I synthesize Q4 results and justify why I am upgrading the rating from hold to buy.

Fidus Investment offers a strong opportunity for investors looking to diversify away from popular upper middle-market BDCs. Fidus Investment reported a decrease in adjusted net income in Q4 as a result of seasonal tax impact and share issuance, however its total investment income rose. Portfolio quality remained steady, with a low level of non-accruals.

Fidus Investment has performed well in 2023 rewarding shareholders with extra income in the form of specials & supplementals. FDUS has a 3-year dividend growth rate of 43.33%, beating out Capital Southwest's 39.02%. Additionally, the BDC has impressive 3 & 5-year total returns. This coupled with their dividend growth has all the makings of a future superstar in the sector.